We study experimentally how the ability to communicate affects the frequency andeffectiveness of flexible and inflexible contracts in a bilateral trade context where sellers canadjust trade quality after observing a post-contractual cost shock and a discretionary buyertransfer. In the absence of...

We study whether behavior in experimental gift-exchange markets with repeated interaction is affected by market conditions. One issue we consider is the impact of competitive imbalance, by varying whether there is an excess supply of firms or an excess supply of workers in the market. Workers...

While the theoretical industrial organization literature has long argued that excess capacity can be used to deter entry into markets, there is little empirical evidence that incumbent firms effectively behave in this way. Bagwell and Ramey (1996) propose a game with a specific sequence of moves...

This paper presents evidence that the willingness to punish an unfair action is sensitive to whether this action was preceded by a deceptive message. One player first sends a message indicating an intended play, which is either favorable or unfavorable to the other player in the game. After the...

In experiments with two-person sequential games we analyze whether responses to favorable and unfavorable actions depend on the elicitation procedure. In our 'hot' treatment the second player responds to the first player's observed action while in our 'cold' treatment we follow the 'strategy...

The standard procedure in experimental economics maintains anonymity among laboratory participants. Yet, many field interactions are conducted with neither complete anonymity nor complete familiarity. When we are involved in interactive situations in the field, we usually have some clues...

Unethical behavior within organizations is not rare. We investigate experimentallythe role of status-seeking behavior in sabotage and cheating activities aiming at improving one’sperformance ranking in a flat-wage environment. We find that average effort is higher whenindividuals are...

The gift-exchange game is a form of sequential prisoner’s dilemma, developed by Fehr, Kirchsteiger, and Riedl (1993), and popularized in a series of papers by Ernst Fehr and co-authors. While the European studies typically feature a high degree of gift exchange, the few U.S. studies...

We examine decision-making under risk and uncertainty in a laboratory experiment. The heart of our design examines how one’s propensity to use Bayes’ rule is affected by whether this rule is aligned with reinforcement or clashes with it. In some cases, we create environments where...

Costless and non-binding pre-play communication (cheap talk) has been found to often be effective in achieving efficient outcomes in experimental games. However, in previous two-player experimental games each player was informed about both his payoff and the action of the other player in the...