IDEAS home Printed from https://ideas.repec.org/p/tuc/tucewp/0007.html
   My bibliography  Save this paper

To Choose or Not to Choose: Contracts, Reference Points, Reciprocity, and Signaling

Author

Abstract

Hart and Moore (2008) argue that varying degrees of flexibility in contracts induce differing reference points and aspiration levels for parties’ shares of a transaction’s total surplus. As a consequence, a trade-off between adaptational flexibility and the prevention of distributional conflicts emerges. In a recent paper, Fehr et al. (2009b) analyze a buyer-seller-relationship with incomplete contracts and ex ante uncertainty regarding the sellers’ cost level to test these effects. We re-run their experiment and introduce another treatment with exogenously determined contract types. Like FHZ we find reference point effects in both treatments. However, uncooperative shading behavior in our treatments differs substantially from that described in FHZ. Furthermore, it makes a significant difference whether contract types are determined by buyers or determined exogenously. We explain this by introducing two further effects, a reciprocity effect and a signaling effect.

Suggested Citation

  • Mathias Erlei & Christian Reinhold, 2012. "To Choose or Not to Choose: Contracts, Reference Points, Reciprocity, and Signaling," TUC Working Papers in Economics 0007, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    • Handle: RePEc:tuc:tucewp:0007
    as

    Download full text from publisher

    File URL: http://ftp.tu-clausthal.de/pub/institute/wiwi/RePEc/pdf/ER_ToChooseOrNotToChoose_190112.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mathias Erlei & Wiebke Roß, 2013. "Bounded Rationality as an Essential Component of the Holdup Problem," TUC Working Papers in Economics 0009, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    2. Björn Bartling & Klaus M. Schmidt, 2015. "Reference Points, Social Norms, And Fairness In Contract Renegotiations," Journal of the European Economic Association, European Economic Association, vol. 13(1), pages 98-129, February.
    3. Neilson, William & Price, Michael & Wichmann, Bruno, 2018. "Added surplus and lost bargaining power in long-term contracting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 76(C), pages 7-22.

    More about this item

    Keywords

    contracts; reference points; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tuc:tucewp:0007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Hirschmann (email available below). General contact details of provider: https://edirc.repec.org/data/avtucde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.