Should one use words or money to foster trust of the other party if no means of enforcing trustworthiness are available? This paper reports an experiment studying the effectiveness of two types of mechanisms for promoting trust: a costly gift and a costless message as well as their mutual...

While most of the previous literature interprets trust as an action, we adopt a view that trust is represented by a belief that the other party will return a fair share. The agent's action is then a commitment device that signals this belief. In this paper we propose and test a conjecture that...

Experimental evidence suggests the size of the foregone outside option of the first mover does not affect the behavior of the second mover in the lost wallet game. In this paper we experimentally compare the behavior of subjects when they face an outside option with unequal payoffs, i.e., the...

We theoretically and experimentally examine the implications of trusting behavior arising under sequential and simultaneous designs. In this institutional design problem, player A makes an investment choice, and player B decides whether to share the investment gains with player A. In the...

This paper reports on an experiment studying the effectiveness of two types of mechanisms for promoting trust: pecuniary and non-pecuniary as well as their mutual interaction. Our data provide evidence that both mechanisms significantly enhance trust in comparison to the standard investment...

Experimental evidence suggests that the size of the foregone outside option does not affect the behavior of the opponent in a lost wallet and pie sharing games but that it matters in a mini-ultimatum game. In this paper we experimentally test a conjecture that it is the fairness property of the...

What is the motivational effect of imposing a minimum effort requirement? 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 principalagent model where control...

Sick-pay is a common provision in labor contracts. It insures workers against a sudden loss of income due to unexpected absences and helps them smooth consumption. Therefore, many governments find sick-pay socially desirable and choose to mandate its provision. But sick-pay is not without its...