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http://hdl.handle.net/10419/27374
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| Title: | | Indenture as a self-enforced contract device: an experimental test  |
| Authors: | | Kritikos, Alexander S. Tan, Jonathan H. W. |
| Issue Date: | | 2009 |
| Series/Report no.: | | Discussion papers // German Institute for Economic Research 851 |
| Abstract: | | We experimentally test the efficacy of indenture as a self-enforced contract device. In an indenture game, the principal signals the intention of payment-on-delivery, by tearing a banknote and giving the agent half of it as prepayment; the agent receives the completing half after delivering the service. By forward induction, cooperation is incentive-compatibly self-enforcing. The indenture performs very well, inducing a significantly higher level of cooperation than that in a three-stage centipede game, which we use to benchmark the natural rate of cooperation. The difference between cooperation rates in both games increases over time. |
| Subjects: | | Cooperation experiment contracts indenture reciprocity |
| JEL: | | C91 D64 J41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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