This study develops a two-country New Keynesian model incorporating deep habits in consumption to analyze macroeconomic dynamics under the optimal coordinated monetary policy. The central bank adjusts interest rates more aggressively in response to structural shocks in an open economy than in a closed economy. Deep habits strengthen the central bank’s incentive to adjust terms of trade through interest rates due to habit formation and counter-cyclical markup behavior, creating price inelasticity in demand. Deep habits also lead to deviations from the law of one price, reflected in goods-specific real exchange rates, which the degree of home bias influences. Finally, this study compares international policy coordination to noncoordination to analyze welfare gains, showing that they depend on key structural factors like price rigidity, deep habits, and home bias. Policy coordination stabilizes domestic output and inflation by internalizing externalities in terms of trade and consumption.

This study investigates the mechanisms driving the effectiveness of free-form communication in promoting cooperation within a sequential social dilemma game. We hypothesize that the self-constructing nature of free-form communication enhances the sincerity of messages and increases the disutility of dishonoring promises. Our experimental results demonstrate that free-form messages outperform both restricted promises and treatments where subjects select and use previously constructed free-form messages. Interestingly, we find that selected free-form messages and restricted promises achieve similar levels of cooperation. We observe that free-form messages with higher sincerity increase the likelihood of high-price and high-quality choices, thereby promoting cooperation. These messages frequently include promises and honesty, while threats do not promote cooperation. Our findings emphasize the crucial role of the self-constructed nature of free-form messages in promoting cooperation, exceeding the impact of message content compared to restricted communication protocols.

Two rationales have emerged for why individuals keep their promises: (a) an emotional commitment to keep actions and words consistent, a commitment rationale and (b) avoidance of guilt due to not meeting the expectations of the promisee, an expectations rationale. We propose a new dichotomy with clearer distinctions between rationales: (1) an internal consistency rationale, which is the desire to keep actions and words consistent regardless of others’ awareness of the promise and (2) a communication rationale, which captures all aspects of promise keeping that are associated with the promisee having learned of the promise, including but not limited to promisee expectations. Using an experiment that manipulates whether promises are delivered, we find no support for the internal consistency rationale; only delivered promises are relevant. In a second experiment designed to better understand what aspect of promise delivery influences promisor behavior, we manipulate whether the promise is delivered before or after the promisee is able to take a trusting action. We find late-arriving promises are relevant though not as relevant as promises delivered before the promisee chooses whether to take the trusting action. We conclude that implicit contracting does not fully explain promise keeping, because had it done so, late-arriving promises would also be irrelevant.

We set out to test whether the effect of promises on trustworthiness derives from the fact that they are made (internal consistency) or that they are received (social obligation). The results of an experimental trust game appeared at first to support the former mechanism. Even when trustee messages are not delivered to trustors, trustees who make a promise are more likely to act trustworthy than those who do not make a promise. However, we subsequently ran a control treatment with restricted (non-promise) communication to examine whether the correlation between promises and trustworthiness is causal. The results show that the absence of promises does not decrease average cooperation rates. This indicates that promises do not induce trustworthiness, they are just more likely to be sent by cooperators than by non-cooperators.

Game theory predicts that players make strategic commitments that may appear counter-intuitive. We conducted an experiment to see if people make a counter-intuitive but strategically optimal decision to avoid information. The experiment is based on a sequential Nash demand game in which a responding player can commit ahead of the game not to see what a proposing player demanded. Our data show that subjects do, but only after substantial time, learn to make the optimal strategic commitment. We find only weak evidence of physical timing effects.

As informational leakages become a common occurrence in economic and business settings, the impact of observability on behavior in adversarial situations assumes increased importance. Consider a two-player contest where there is a probabilistic information leak about one player’s action and the recipient of the information has the ability to revise his contest expenditure in response to the leaked rival choice. How does the ability to revise and resubmit affect each contestant’s behavior? We design a laboratory experiment to study this question for two well-known contest games: the lottery contest and the all-pay auction. Equilibrium predicts that compared to simultaneous moves, the strategic asymmetry arising from the ability to revise has no effect on expected expenditure in the lottery contest. In contrast, in the all-pay auction expected expenditure is decreasing in the probability of informational leakage. Experimental data support these predictions despite overexpenditure relative to equilibrium. Furthermore, the potential observability of the rival’s action confers an advantage on the informed player not only in the all-pay auction, as theory predicts, but also in the lottery contest if the probability of leakage is high.

We consider a sequential two-party bargaining game with uncertain information transmission. When the first mover states her demand she does only know the probability with which the second mover will be informed about it. The informed second mover can either accept or reject the offer and payoffs are determined as in the ultimatum game. Otherwise the uninformed second mover states his own demand and payoffs are determined as in the Nash demand game. In the experiment we vary the commonly known probability of information transmission. Our main finding is that first movers’ and uninformed second movers’ demands adjust to this probability as qualitatively predicted, that is, first movers’ (uninformed second movers’) demands are lower (higher) the lower the probability of information transmission.

This paper focuses on the relationship between individual self-control and peer pressure. To this end, we performed a laboratory experiment that proceeded in two parts. The first part involved an individual real-effort task in which subjects could commit themselves to a particular level of performance while being tempted by an alternative recreational activity. The second part consisted of bargaining in a power-to-take game in which previously earned revenues were at stake. The experimental treatments involved variations in the available information provided to peers about previous individual behavior. The results show that many subjects make a serious commitment. Further, the subsequent revelation of commitment level induces subjects to increase the credible components of their commitment decisions. Past individual behaviors also play a role in bargaining because (i) partners who have committed themselves benefit from lower rates of both take and destruction and (ii) partners who have succumbed to temptation suffer from higher rates of both take and destruction.

Most multilateral bargaining models predict bargaining power to emanate from pivotality—a party’s ability to form different majority coalitions. However, this prediction contrasts with the empirical observation that negotiations in parliamentary democracies typically result in payoffs proportional to parties’ vote shares. Proportionate profits suggest equality rather than pivotality drives results. We design an experiment to study when bargaining outcomes reflect pivotality versus proportionality. We find that commitment timing is a crucial institutional factor moderating bargaining power. Payoffs are close to proportional if bargainers can commit to majority coalitions before committing to how to share the pie, but pivotality dictates outcomes otherwise. Our results help explain Gamson’s Law, a long-standing puzzle in the legislative bargaining literature.

In this paper, I will compare three reportative constructions: the French reportative conditional, Dutch zou + inf, and German sollen + inf. Although these markers share the reportative function as one of their established meanings, they clearly differ in how this reportative meaning actually functions. One of the most important differences pertains to the fact that the French conditional (and to a lesser extent Dutch zou + inf) often combines reportative meaning with epistemic denial, i.e. the speaker distances him- or herself from the content of what he or she reports. German reportative sollen also allows for such distancing interpretations but to a much smaller extent. Specifically for this paper, I will look at the behaviour of the three markers in the immediate context of the noun ‘rumours’ (French rumeurs, Dutch geruchten, and German Gerüchte), a context which – at least in theory – is strongly compatible with reportative marking, on the one hand, and with epistemic denial, on the other. On the basis of a self-compiled corpus of recent newspaper language, I will show that the French conditional occurs with a relatively high frequency in this specific context, especially in contrast to German sollen, and that the conditional often combines reportative semantics with epistemic denial, which again especially contrasts with German sollen + inf. Dutch zou + inf takes up an intermediate position in both respects.

We are all capable of arriving at views that are driven by corrupting non-epistemic interests. But we are nonetheless very skilled at performing a commitment to epistemic goods in such cases. I call this the “Problem of Mere Epistemic Performance,” and it generates a need to determine when these commitments are illusory and when they are in fact genuine. I argue that changing one’s mind, when done in response to the evidence and at a likely cost to oneself, is the best indication that an agent is committed to epistemic goods and that they are genuinely in the game of giving and asking for reasons. This is because changing one’s mind in this way goes as far as we can in eliminating the possibility that the agent has an ulterior motivation for their epistemic practices. Moreover, this account shows that the consensus view of the ideal epistemic agent is mistaken. The ideal agent must have false beliefs or deficient epistemic practices because only then do they have the opportunity to change their mind and establish a commitment to epistemic goods – a commitment that even an agent with only true beliefs and maximal justification or understanding may lack.

Building on a partner-switching mechanism, we experimentally test two theories that posit different reasons why promises breed trust and cooperation. The expectation-based explanation (EBE) operates via belief-dependent guilt aversion, while the commitment-based explanation (CBE) suggests that promises offer commitment power via a (belief-independent) preference to keep one’s word. Previous research performed a similar test, which we argue should be interpreted as concerning informal agreements rather than (unilateral) promises.

Leader–member exchange (LMX), a well-researched leadership theory that focuses on the dyadic relationships between leaders and subordinates, is associated with positive subordinates’ outcomes. However, the contexts outside the LMX dyadic relationship might influence those favorable outcomes. In this study, we investigate the cross-level moderating effect of leader’s feelings of violation, as a contextual boundary, on LMX outcomes. Based on social exchange theory, crossover model, and the psychological contract literature, we discuss how the relationship between a subordinate’s perceived LMX and favorable subordinate attitudes and behaviors, such as performance, task-focused citizenship behaviors, and organizational commitment, is reduced when the leader experiences feelings of violation toward the organization. Using a three-wave time-lagged multilevel design with a sample of 226 subordinates and 39 leaders, we find that leader’s feelings of violation mitigate the positive association of perceived LMX on citizenship behavior and commitment but have no effect on performance. Research and practical implications are discussed.