We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance provide powerful incentives and are superior to explicit...

Simple bargaining games are the foundation of more complex social interactions necessary for healthy relationships and well‐functioning societies. Neuroscience research has shown that high‐level deliberative thinking processes are necessary for social‐decision making - it seems cognitively...

We show experimentally that a principal's distrust in the voluntary performance of an agent has a negative impact on the agent's motivation to perform well. Before the agent chooses his performance, the principal in our experiment decides whether he wants to restrict the agents' choice set by...

Several studies indicate that humans are overconfident about their own (relative) abilities. The paper proposes a notion of pragmatic beliefs, and shows through an example that this concept can shed light on why overconfidence emerges. Through the example, we also shed light on the idea that...

When there are constantly new, valuable opportunities to transact with alternative partners — a situation we refer to as exchange value uncertainty — long-term or committed transactions among the same individuals are discouraged. But when opportunism creates exchange hazards, which escalate in...

Despite the common belief that they are found only in the common law tradition, trusts have long been known in certain mixed jurisdictions that have a civilian law of property. Trusts have now been introduced by legislation in a number of civilian jurisdictions, such as France and China. Other...

Common law doctrine states that although there are many similarities, the estate of a deceased person is not a trust. The doctrine is unclear, however, as to exactly what are the differences, or why they exist. This paper begins by explaining the conceptual differences between a common law...

Trusts law is infused with the presence of property. By itself, this is not a problem, but what is a problem is the elevated position that property has acquired in trusts law; it has gone from being merely descriptive to being prescriptive. That is, property is now a requirement, and without it...

This note considers the decision of the Irish High Court in Re Prendiville (1992) which dealt with the enforcement of half-secret trusts. It confirms, in a case where the point arose for decision, that Irish law rejects “the prior acceptance rule” favoured in the English cases. The judgment...

In Australia, it is often thought that the decision whether to impose a constructive trust invariably attracts the exercise of remedial discretion. This paper argues that, in reality, the exercise of discretion is highly circumscribed. Further, where such discretion is exercised, it is useful...