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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Contracts as reference points - experimental evidence |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | American Economic Review |
| Publisher | American Economic Association |
| Geographical Reach | international |
| ISSN | 0002-8282 |
| Volume | 101 |
| Number | 2 |
| Page Range | 249 - 525 |
| Date | 2011 |
| Abstract Text | Hart and John Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and the employment relation. We examine experimentally their idea that contracts serve as reference points. The evidence confirms the prediction that there is a trade-off between rigidity and flexibility. Flexible contracts--which would dominate rigid contracts under standard assumptions--cause significant shading in ex post performance, while under rigid contracts much less shading occurs. The experiment appears to reveal a new behavioral force: ex ante competition legitimizes the terms of a contract, and aggrievement and shading occur mainly about outcomes within the contract |
| Digital Object Identifier | 10.1257/aer.101.2.493 |
| Other Identification Number | merlin-id:3941 |
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