The constraint shows that reductions in the benefits from defecting on an implicit agreement should generate more cooperative behavior, while changes that reduce payoffs at very large choices should only alter behavior if agents act in accordance with a trigger strategy that has a short-lived but intense punishment phase. This paper uses data from two-person experimental games to test hypotheses. We find that subject behavior is generally consistent with a trigger strategy model that has a permanent punishment phase.
Spot sales require the seller to hold inventory before trading.
This inventory cost diminishes spot activity relative to forward trading volume. Data from computerized double auctions are analyzed. When traders have a choice of institution, prices and quantities resembe a forward only auction. We design laboratory bargaining games to observe behavior in such an environment and compare it to a control design that has no explicit delays. Results show there is a significant first mover advantage, and agreements are more uniformly spread across bargaining periods.