NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Christian Zehnder

Faculty of Business and Economics
University of Lausanne
Quartier UNIL-Dorigny
Internef 612
CH-1015 Lausanne
Switzerland

E-Mail: christian.zehnder@unil.ch

NBER Working Papers and Publications

October 2011How Do Informal Agreements and Renegotiation Shape Contractual Reference Points?
with Ernst Fehr, Oliver D. Hart: w17545
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. Inte...
November 2008Contracts as Reference Points - Experimental Evidence
with Ernst Fehr, Oliver D. Hart: w14501
In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore's notion that contracts provide reference points. In this paper, we examine experimentally the behavioral forces stipulated in their theory. The evidence confirms the model's prediction that there is a tradeoff between rigidity and flexibility in a trading environment with incomplete contracts and ex ante uncertainty about the state of nature. Flexible contracts - which would dominate rigid contracts under standard assumptions - cause a significant amount of shading on ex post performance, while under rigid contrac...

Published:

  • Ernst Fehr & Oliver Hart & Christian Zehnder, 2009. "Contracts, Reference Points, and Competition-Behavioral Effects of The Fundamental Transformation," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 561-572, 04-05.
  • Ernst Fehr & Oliver Hart & Christian Zehnder, 2011. "Contracts as Reference Points--Experimental Evidence," American Economic Review, American Economic Association, vol. 101(2), pages 493-525, April. citation courtesy of

 
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