When workers' investments in firm-specific skills are non-contractible underinvestment may occur because of holdup. Up-or-out contracts can potentially solve this problem by limiting the firm's scope for opportunistic behavior. The downside of such contracts is that a worker who does not make...

We report results from an experiment based on a simplified version of Hart's (1995) property rights theory of the firm. Only one manager invests and this investment is completely specific. In that case the theory predicts that the level of investment is not affected by the level of no-trade...

One of the main findings of a large body of gift exchange experiments is that in an incomplete contracts environment workers on average do not shirk and usually provide more than the minimum enforceable effort level. In general, 40 to 60 percent of the workers reward higher wages with higher...