Using the concept of Inequity Aversion we derive in a Moral Hazard setting several results which differ from conventional contract theory. Our three key insights are: First, inequity aversion plays a crucial role in the design of optimal contracts. Second, there is a strong tendency towards...

Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. If she does not provide justification, her message space is restricted, but the message is costless. I...

Neither marriage nor a legally enforceable contract serves any useful purpose if the parties have access to a perfect credit market. In the presence of credit rationing, efficiency and utility equalization are guaranteed only by a legally enforceable contract. Separate-property marriage may...

Consider a contract over trade in continuous time between two players, according to which one player makes a payment to the other, in exchange for an exogenous service. At each point in time, either player may unilaterally require an adjustment of the contract payment, involving adjustment costs...

We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher...

We consider a public-private partnership in an infrastructure project, which requires specialised expertise during the construction stage for the infrastructure to operationalise. This entails that, after an investment is made to begin building the infrastructure, its construction is completed...

Solar geoengineering has received increasing attention as an option to temporarily stabilize global temperatures. A key concern surrounding these technologies is that heterogeneous preferences over the optimal amount of cooling combined with low deployment costs may allow the country with the...

We modify the Acquiring-a-Company game to study lying in ultimatum bargaining. Privately informed sellers send messages about the alleged value of their company to potential buyers. Via random information leaks, buyers can learn the true value before proposing a price which the seller finally...

We investigate the causal impact of public discourse on socially responsible market behavior. We conduct laboratory market experiments with products that differ in their production costs and social impact, and provide market actors and impacted third parties with the opportunity to discuss...

We survey directors and investors on the objectives, constraints, and determinants of CEO pay. 67% of directors would sacrifice shareholder value to avoid controversy on CEO pay, implying they face significant constraints other than participation and incentive compatibility. These constraints...