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.

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Keywords Agreements, Communication, Experiment, Game theory, Negotiations, Temptation
Persistent URL dx.doi.org/10.1016/j.geb.2016.12.008
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