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Behaviorally efficient remedies: An experiment

Author

Listed:
  • Engel, Christoph
  • Freund, Lars

Abstract

Under common law, the standard remedy for breach of contract is expectation damages. Under continental law, the standard is specific performance. The common law solution is ex post efficient. But is it also ex ante efficient? We use experimental methods to test whether knowing that non-fulfilment will only give a right to damages deters mutually beneficial trade. The design excludes aversion against others willfully breaking their promises, and fairness concerns. We find that there is indeed less trade if specific performance is not guaranteed, provided the preference for the traded commodity is sufficiently pronounced.

Suggested Citation

  • Engel, Christoph & Freund, Lars, 2026. "Behaviorally efficient remedies: An experiment," International Review of Law and Economics, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:irlaec:v:85:y:2026:i:c:s0144818826000013
    DOI: 10.1016/j.irle.2026.106321
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    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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