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Repeated moral hazard and contracts with memory: A laboratory experiment

  • Nieken, Petra
  • Schmitz, Patrick W.

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals can benefit from offering long-term contracts that exhibit memory.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899825612000310
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 2 ()
Pages: 1000-1008

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:2:p:1000-1008
DOI: 10.1016/j.geb.2012.02.011
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  11. Sturm, Bodo & Riechmann, Thomas & Dannenberg, Astrid & Vogt, Carsten, 2007. "Inequity Aversion and Individual Behavior in Public Good Games: An Experimental Investigation," ZEW Discussion Papers 07-034 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  14. Arnaud De Bruyn & Gary E. Bolton, 2008. "Estimating the Influence of Fairness on Bargaining Behavior," Management Science, INFORMS, vol. 54(10), pages 1774-1791, October.
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  17. Pitchford, Rohan, 1998. "Moral hazard and limited liability: The real effects of contract bargaining," Economics Letters, Elsevier, vol. 61(2), pages 251-259, November.
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  19. McKelvey, Richard D. & Palfrey, Thomas R., 1994. "Quantal Response Equilibria For Normal Form Games," Working Papers 883, California Institute of Technology, Division of the Humanities and Social Sciences.
  20. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
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  22. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
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