Mutually beneficial agreements might fail if the parties fear contractual opportunism. Litigation is supposed to be a remedy, but gives scope for another kind of opportunistic behavior which we call litigational opportunism: Even knowing that the opponent has fulfilled his obligations, a party...

In this paper we analyze whether trust can overcome the contractual hazards caused by the territoriality of law, how effective trust is and what the impact is on the sequential structure of trade. The paper contributes to the New Institutional Economics of International Transactions (NIEIT).

If a seller delivers a good non-conforming to the contract, Article 2 of the UCC as well as European warranty law allows consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer resorts to "opportunistic...

Can a court system conceivably control opportunistic behavior if judges are selected from the same population as ordinary citizens and thus are no better than "the rest of us"? This paper provides a new and, as we claim, quite profound "rational choice" answer to that unsolved riddle. Adopting...

In economic approaches it is often argued that reputation considerations influence the behavior of individuals or firms and that reputation influences the outcome of markets. Empirical evidence is rare though. In this contribution we argue that a positive reputation of sellers should have an...

The U.K.'s decision to leave the EU and the voting in of the protectionist Donald Trump to the US presidency has drawn both the UK and the USA into the Nash Trap.U.S. mathematician John Nash (the movie ‘A Beautiful Mind') postulated that Adam Smith's declaration that ‘In competition,...

In three experiments, we examine how an employer reputation system disciplines an online labor market (Amazon Mechanical Turk) in which employers may decline to pay workers while keeping their work product. These three experiments test the value of the employer reputation system for workers,...

We use economic experiments to examine the nature of relational trading under a menu of incomplete contracts ranging from the repeat purchase mechanism of Klein and Leffler (1981) to highly incomplete contracts that are completely unenforceable by third-parties. Our results suggest that, with...

Current law and economics scholarship analyzes efficient breach cases monolithically. The standard analysis holds that breach is efficient when performance of a contract generates a negative total surplus for the parties. However, by simplistically grouping efficient breach cases as of a single...