Breach remedies serve an important role in protecting relationship-specific investments. Theory predicts that some common remedies protect too well and induce overinvestment, either though complete insurance against potential separation or the possibility that breach is prevented by increasing...

Theory predicts that default breach remedies are immaterial whenever contracting costs are negligible. Some experimental studies, however, suggest that in practice default rules do matter, as they may affect parties' preferences over contract terms. This paper presents results from an experiment...

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...