Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93839
Authors: 
Bartling, Björn
Schmidt, Klaus M.
Year of Publication: 
2012
Series/Report no.: 
SFB/TR 15 Discussion Paper 385
Abstract: 
Several recent papers argue that contracts provide reference points that affect ex post behavior. We test this hypothesis in a canonical buyer-seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and economically important impact on renegotiation behavior that goes beyond the effect of contracts on bargaining threatpoints. We compare situations in which an initial contract is renegotiated to strategically equivalent bargaining situations in which no ex ante contract was written. The ex ante contract causes sellers to ask for markups that are 45 percent lower than in strategically equivalent bargaining situations without an initial contract. Moreover, buyers are more likely to reject given markups in renegotiations than in negotiations. We do not find that these effects are stronger when the initial contract is concluded under competitive rather than monopolistic conditions.
Subjects: 
renegotiation
bargaining
reference points
contracts
competition
JEL: 
C78
C91
D03
D86
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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