Ex-post opportunistic behavior, commonly present in bilateral trade relationships, is a key element of the transaction cost economics. Investment in outside options is a prime example of such opportunism and often leads to inefficiency, for example by exerting effort to search for alternative...

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...

We conduct a field experiment to test theoretical predictions regarding the effect of deadline length on task completion. We place our test in a charitable task setting in which participants are invited to complete an online survey, with a donation going to charity if they do so. Participants...