When Perception is Reality : Subjective Expectations and Contracting

Over the past five years or so, applied economists have been relying increasingly on subjective perceptions to explain behavior. In Bellemare (2009a, 2009b) I elicited from landlords subjective perception of tenurial insecurity as a result of the land tenancy contract they signed with their tenant and similar subjective perception as a result of the (hypothetical) alternative contract. This paper discusses how one might explicitly incorporate subjective perceptions in applied contract theory and opens the 'black box' of subjective perceptions in this context by studying their empirical determinants