Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers' relative effort affects the allocation of production costs, but a...

Many new and proposed emissions trading systems involve multiple countries and regions. The introduction of interregional trading raises questions about how flexible state- or national-level authorities should be in allowing individual firms to trade with firms or authorities in other states or...

In this experiment, sellers simultaneously choose prices and advertising strategies. Buyers either purchase at an advertised price or search sequentially for other prices. In the unique symmetric equilibrium, sellers charge a high unadvertised price or advertise a price chosen from a lower...

This paper presents an experimental study of two mechanisms that influence incentives to reduce ambient pollution levels. In the formal mechanism individuals face a penalty if the group generates total pollution that exceeds a specified target, whereas in the informal mechanism individuals can...

This paper reports the results from a laboratory microfinance experiment of group lending in the presence of moral hazard and (costly) peer monitoring. We compare peer monitoring treatments in which credit is provided to members of the group to individual lending treatments with lender...