Honesty and informal agreements
We develop, and experimentally test, models of informal agreements. Agents are assumed to be honest but suffer costs of overcoming temptations. We extend two classical bargaining solutions – split-the-difference and deal-me-out – to this informal agreement setting. For each solution there are two natural ways to do this, leaving us with 2×2 models to explore. In the experiment, a temptations-constrained version of deal-me-out emerges as the clear winner.
|Keywords||Agreements, Communication, Experiment, Game theory, Negotiations, Temptation|
|Journal||Games and Economic Behavior|
Dufwenberg, M. (Martin), Servátka, M. (Maroš), & Vadovič, R. (2017). Honesty and informal agreements. Games and Economic Behavior, 102, 269–285. doi:10.1016/j.geb.2016.12.008