Honesty and informal agreements

Martin Dufwenberg; Maroš Servátka; Radovan Vadovič

doi:10.1016/j.geb.2016.12.008

Honesty and informal agreements

Martin Dufwenberg, Maroš Servátka, Radovan Vadovič^*

^*Corresponding author for this work

Macquarie Graduate School of Management

Research output: Contribution to journal › Article › peer-review

14 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	269-285
Number of pages	17
Journal	Games and Economic Behavior
Volume	102
DOIs	https://doi.org/10.1016/j.geb.2016.12.008
Publication status	Published - 1 Mar 2017

Keywords

Agreements
Communication
Experiment
Game theory
Negotiations
Temptation

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10.1016/j.geb.2016.12.008

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AB - 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.

KW - Agreements

KW - Communication

KW - Experiment

KW - Game theory

KW - Negotiations

KW - Temptation

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Honesty and informal agreements

Abstract

Keywords

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