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Title:Contracts and promises: An approach to pre-play agreements PDF Logo
Authors:Miettinen, Topi
Issue Date:2008
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 707
Abstract:In line with the widely applied principle of just deserts, we assume that the severity of the penalty on a contract offender increases in the harm on the other. When this principle holds, the influence of the efficiency of the agreement on the incentives to abide by it crucially depends on whether actions are strategic complements or substitutes. With strategic substitutes, there is a conflict between Pareto-efficiency and the incentives to abide. The opposite tends to be true when actions are strategic complements. The results are interpreted in the context of legal contracts and in that of informal mutual promises.
Subjects:partnerships
contracts
pre-play communication
legal enforcement
social norms
guilt
JEL:C72
C78
K12
Z13
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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