Contracts as Reference Points--Experimental Evidence
Hart and John Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and the employment relation. We examine experimentally their idea that contracts serve as reference points. The evidence confirms the prediction that there is a trade-off between rigidity and flexibility. Flexible contracts--which would dominate rigid contracts under standard assumptions--cause significant shading in ex post performance, while under rigid contracts much less shading occurs. The experiment appears to reveal a new behavioral force: ex ante competition legitimizes the terms of a contract, and aggrievement and shading occur mainly about outcomes within the contract. (JEL D44, D86, J41)
Year of publication: |
2011
|
---|---|
Authors: | Fehr, Ernst ; Hart, Oliver ; Zehnder, Christian |
Published in: |
American Economic Review. - American Economic Association - AEA. - Vol. 101.2011, 2, p. 493-525
|
Publisher: |
American Economic Association - AEA |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Contracts as reference points: experimental evidence
Fehr, Ernst, (2008)
-
How do informal agreements and renegotiation shape contractual reference points?
Fehr, Ernst, (2011)
-
How do informal agreements and renegotiation shape contractual reference points?
Fehr, Ernst, (2011)
- More ...