In this paper we use the experimental method to determine whether reputation is a substitute for commitment in the Peasant-Dictator game. Reputation is an imperfect substitute for commitment in the experiment. It is less efficient on average. Its effectiveness as a substitute declines as the return on investment declines. However, there are cohorts that converge to a convention exhibiting high levels of trust and trustworthiness in which behavior under reputation is indistinguishable from behavior under commitment.

We report an experiment designed to test the influence of commitment versus discretion in a simple bargaining game. Game theory predicts and the public policy literature emphasizes that the ability to make commitments promotes efficiency. We find that commitment does significantly increase efficiency in the experiment. Finally, we relate our findings to the extant literature on extensive form bargaining experiments by examining fairness and trust as explanations for some observed anomalies. Journal of Economic Literature Classification Numbers: C720, C790, C920, E610.