Sick pay is a common provision in most labor contracts. This paper employs an experimental gift-exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate sick pay in the same way as they reciprocate wage payments?...

What is the motivational effect of imposing a minimum effort require- ment? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal- agent model where control...

Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have gathered overwhelming evidence that systematically refutes the self-interest hypothesis and suggests...

In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that four-firm industries form cartels more often than duopolies because they gain less from a hysteresis effect after cartel...

We experimentally study behavior in a finitely repeated coalition formation game played in real time. Subjects interact in groups of three, bargaining over the distribution of payments which occur at regular time intervals. During a given interval, payments occur if and only if a majority is in...

We study experimentally "partnership protocols" of the sort proposed by Kalai and Kalai (2010), for bilateral trade games with incomplete information. We utilize the familiar game analyzed by Chatterjee and Samuelson (1983) and Myerson and Sattherwaite (1983), with a buyer and seller with value...

We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are optimal according to self-interest theory become inferior when some agents value fairness. Conversely,...

The quantal response equilibrium (QRE) notion of McKelvey and Palfrey (1995) has recently attracted considerable attention, due in part to its widely documented ability to rationalize observed behavior in games played by experimental subjects. However, even with strong a priori restrictions on...

Communication has been shown to play a positive role in promoting trust, yet there is no evidence on how sensitive this result is to the size of the gains from cooperation. To investigate this issue, we adopt an experimental design in which a trustee can send a free form message to a trustor,...

Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team-incentives within firms, group sports, and rent-seeking. In order to succeed, members of the same group have incentives to cooperate with each other by expending individual...