When Court enforcement is excessively difficult or costly, agents are often able to create «endogenous enforcement mechanisms», that is, to design agreements so that each party finds it optimal to carry them out (self-enforcing implicit contracts), thanks to the threat of sanctions affecting...

This dissertation is composed of three self-contained essays on strategic interactions under incomplete contracting. Chapter 1 considers the evolution of reciprocal preferences in a setting where individuals live in separate groups. Chapter 2 analyzes the costs and benefits of a separation of...

The literature on public goods has shown that e?cient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions e?ciency considerations justify that individuals are forced to pay for...

In the hold-up problem incomplete contracts cause the proceeds of relation specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior...

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that...

This article provides a non-technical survey on recent topics in the theory of contracts. The hold-up problem is presented and the incomplete contracts approach is discussed. Emphasis is put on conceptual problems and open questions that await further research.

We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish actors become inferior when some agents are concerned about fairness. Conversely, contracts that...

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting...

We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and...

We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and...