Mechanisms for resolving economic dilemmas: experimental evidence from bargaining, contracts, and social norms

Economic interactions often fail to achieve mutually beneficial outcomes due to incomplete information, contractual rigidity, or entrenched social norms. This thesis investigates how institutional mechanisms can mitigate such economic dilemmas and improve coordination and efficiency. Using controlled laboratory experiments, it presents three chapters that examine distinct settings in which coordination failures arise. Chapter 1 studies threshold public goods bargaining under incomplete information and experimentally tests the Random Dictatorship mechanism proposed by Myerson (1984). While the mechanism improves the alignment between individuals’ willingness to contribute and their private valuations, it does not significantly increase agreement rates. Behavioral reluctance to contribute when not selected as proposer limits its effectiveness in one-shot bargaining environments. Chapter 2 examines contract renegotiation following exogenous shocks and compares specific performance and damages as legal remedies. The results show that renegotiation is frequent and largely efficient under both remedies, providing experimental support for the Coasean irrelevance proposition under idealized conditions. Chapter 3 investigates norm entrenchment caused by misperceived social norms and second-order uncertainty. The findings show that ideologically motivated opinion leaders can facilitate norm change, particularly when potential norm violators are a minority and social interactions are homophilous. Overall, the thesis highlights the importance of behavioral responses in shaping the effectiveness of mechanisms designed to resolve coordination problems.