In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore’s notion that...

Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)’s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post...

In this paper, we argue that important labor market phenomena can be better understood if one takes (i) the inherent incompleteness and relational nature of most employment contracts and (ii) the existence of reference-dependent fairness concerns among a substantial share of the population into...

The prevailing labor market models assume that minimum wages do not affect the labor supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have significant and lasting effects on subjects’ reservation wages. The temporary introduction of a minimum...

Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here the...

In a wide variety of settings, spiteful preferences would constitute an obstacle to cooperation, trade, and thus economic development. This paper shows that spiteful preferences - the desire to reduce another's material payoff for the mere purpose of increasing one's relative payoff - are...

Are competitive mechanisms perceived as just sources of economic inequality? Perceptions of fairness violations can have severe economic consequences, as they may cause counterproductive behavior such as rulebook slowdowns or quality shading. To analyze fairness perceptions associated with...

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that...

Research on leadership in economics has developed in parallel to the literature in management and psychology and links between the fields have been sparse. Whereas modern leadership scholars mostly focus on transformational and related leadership styles, economists have mainly emphasized the...

This paper provides field experimental evidence on the prevalence and determinants of discrimination and in-group favoritism in trust decisions. We observe choices of about 1,000 inhabitants of the city of Zurich who take part in a sequential trust game, in which first movers can condition their...