Article ID Journal Published Year Pages File Type
7242826 Journal of Economic Behavior & Organization 2016 35 Pages PDF
Abstract
Hart and Moore (2008) argue that varying degrees of flexibility in contracts induce differing reference points and aspiration levels for parties' shares of a transaction's total surplus. As a consequence, a trade-off between adaptational flexibility and the prevention of distributional conflicts emerges. In a recent paper, Fehr et al. (2011) analyzed a buyer-seller-relationship with incomplete contracts and ex ante uncertainty regarding the sellers' cost level to test these effects. We re-run their experiment and introduce another treatment with exogenously determined contract types. Like FHZ we find some evidence for reference point effects in both treatments. However, uncooperative shading behavior in our treatments differs substantially from that described in FHZ. Furthermore, it makes a significant difference whether contract types are determined by buyers or determined exogenously. We explain this by introducing two further effects, a reciprocity effect and a signaling effect.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,