Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58620 
Year of Publication: 
2011
Series/Report no.: 
IZA Discussion Papers No. 6095
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)'s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post renegotiation. We investigate the relevance of these features experimentally. Our evidence indicates that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation. However, our data also reveal new behavioral features that suggest refinements of the theory. In particular, we find that the availability of informal agreements and ex post renegotiation changes how trading parties evaluate ex post outcomes. Interestingly, the availability of these additional options affects ex post evaluations even in situations in which the parties do not use them.
Subjects: 
contracts
reference points
fairness
renegotiation
informal agreement
JEL: 
C91
D03
D86
J41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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