Behavioral Constraints on the Design of Subgame-Perfect Implementation Mechanisms

We study subgame-perfect implementation (SPI) mechanisms that have been proposed as a solution to incomplete contracting problems. show these mechanisms, which are based on off-equilibrium arbitration clauses impose large fines for lying and the inappropriate use of arbitration, severe behavioral constraints because induce retaliation against legitimate uses arbitration. Incorporating reciprocity preferences into theory explains observed patterns helps us develop new mechanism is more robust achieves high rates truth-telling efficiency. Our results highlight importance tailoring underlying environment. (JEL C92, D44, D82, D86, D91)