This paper discusses the literature on the enforcement of incomplete contracts. It compares legal enforcement to enforcement via relationships and reputations. A number of mechanisms, such as the repeat purchase mechanism (Klein and Leffler (1981)) and efficiency wages (Shapiro and Stiglitz...

We study how different payment modes influence the effectiveness of gift exchange as a contract enforcement device. In particular, we analyze how horizontal fairness concerns affect performance and efficiency in an environment characterized by contractual incompleteness. In our experiment, one...

This paper studies a partial-contracting model where an agent may provide effort to increase a project’s scope before some later decisions have to be taken. Consistent with existing empirical evidence, we find a positive relationship between exogenous risk and delegation. That is, we show that...

We develop a rationale for the payment by firms of a wage premium on marginal, or overtime, weekly hours. We examine wage-hours contracts within the framework of a two-period specific human capital model with asymmetric information. The wage premium serves to achieve contract efficiency. For...

It is frequently argued that pure government-mandated severance transfers by the employer to the worker have neither employment nor welfare effect because they can be offset by private transfers from the worker to the employer. In this paper, using a dynamic search and matching model a la...

The assumption that payoff-relevant information is observable but not verifiable is important for many core results in contract, organizational and institutional economics. However, subgame-perfect implementation (SPI) mechanisms - which are based on off-equilibrium arbitration clauses that...