Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150303
Authors: 
Chassang, Sylvain
Zehnder, Christian
Year of Publication: 
2016
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 11 [Year:] 2016 [Issue:] 3 [Pages:] 1145-1179
Abstract: 
This paper develops a positive model of informal contracting in which rewards and punishments are not determined by an ex ante optimal plan but instead express the ex post moral sentiments of the arbitrating party. We consider a subjective performance evaluation problem in which a principal can privately assess the contribution of an agent to the welfare of a broader group. In the absence of formal contingent contracts, the principal chooses ex post transfers that maximize her social preferences. We characterize the incentives induced by the principal's preferences, contrast them with ex ante optimal contracts, and derive novel testable predictions about the way externalities are internalized in informal settings.
Subjects: 
Informal contracts
social preferences
fairness
intent-based justice
subjective performance evaluation
no punishment without guilt
JEL: 
C72
D23
D86
K13
K42
L20
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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