Many economic interactions are characterized by “all or nothing” action spaces that may limit a demonstrable index of trust and, therefore, the propensity to reciprocate. In two experimental trust games, the action space governing investments was manipulated to examine the effects on...

Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments,...

Using a gift exchange experiment, we show that the ability of reciprocity to overcome incentive problems inherent in principal-agent settings is greatly reduced when the agent's effort is distorted by random shocks and transmitted imperfectly to the principal. Specifically, we find that gift...

Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors such as loss aversion play in the tradeoffs workers face? We address these issues...