By vetoing one question mutually efficient agreements. On the other hand, the threat of vetoing may prevent exploitation. Based on a generalization of ultimatum bargaining (Suleiman, 1996), we first elicit the responders' certainty equivalents for three different degrees of veto power....

Principal-agent theory usually assumes that the players are perfectly rational. In contrast, real human decision makers are only boundedly rational. If a firm (principal) wants to design a work contract that maximizes profit, it should consider how workers (agents) will actually react rather...

Whether Individuals can build up and sustain mutually beneficial cooperation or, more generally, whether they comply with social norms, may depend crucially on the observability of their actions. If these cannot be monitored perfectly, the individual might be tempted to egoistically exploit this...

Experimental studies have shown that trust and reciprocity are effective in increasing efficiency when complete contracting is infeasible. One example is the study by Berg et al. (1995) of the investment game. In this game the person who receives the investment is the one who may reward the...