Eric Posner (2003) has argued that (contract) law and economics has failed to produce clear policy recommendations because its theoretical results are usually inconclusive and empirical data on the parameters are usually unavailable. Legislators and courts, however, cannot wait to make decisions...

In this paper, we argue that, as an enforcement mechanism, efficiency wages are intrinsically inferior to damages and to conditional bonuses – an alternative positive sanction system overlooked in the labor economics literature, under which rents are only paid if monitoring has...