This paper develops a positive model of informal contracting in which rewards and punishments are not determined by an ex ante optimal plan but instead express the ex post moral sentiments of the arbitrating party. We consider a subjective performance evaluation problem in which a principal can...

Although cooperation can lead to mutually beneficial outcomes, cooperative actions only pay off for the individual if others can be trusted to cooperate as well. Identifying trustworthy interaction partners is therefore a central challenge in human social life. How do people navigate this...

Who commits crime? Theoretically, risk-tolerant and impatient people are more likely to commit crime because they care less about the risks of apprehension and punishment. By linking experimental data on risk tolerance and impatience of young men to administrative crime records, we find...

The widespread use of markets leads to unprecedented material well-being in many societies. We study whether market interaction, as a side effect, erodes moral values. In an influential paper, Falk and Szech (2013) provide experimental data that seem to suggest that “market interaction erodes...

We study subgame-perfect implementation (SPI) mechanisms that have been proposed as a solution to incomplete contracting problems. We show that these mechanisms, which are based on off-equilibrium arbitration clauses that impose large fines for lying and the inappropriate use of arbitration,...

When choice is stochastic, revealed preference analysis often relies on random utility models. However, it is impossible to infer preferenceswithout assumptions on the distribution of utility noise. We show that this difficulty can be overcome by using response time data. A simple condition on...