Universität zu Köln

Hoppe, Eva I. and Schmitz, Patrick W. (2011). Can contracts solve the hold-up problem? Experimental evidence. Games Econ. Behav., 73 (1). S. 186 - 200. SAN DIEGO: ACADEMIC PRESS INC ELSEVIER SCIENCE. ISSN 1090-2473

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Abstract

In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem, in particular when renegotiation cannot be prevented Ultimately, this question has to be answered empirically. As a first step, we have conducted a laboratory experiment with 960 participants. We consider investments that direction benefit the non-investing party. While according to standard theory, contracting would useless if renegotiation cannot be ruled out, we find that option contracts significant improve investment incentives compared to a no-contract treatment. This finding might be attributed to Hart and Moore's (2008) recent idea that contracts can serve as reference points. (C) 2010 Elsevier Inc. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Hoppe, Eva I. UNSPECIFIED UNSPECIFIED UNSPECIFIED Schmitz, Patrick W. UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-489731
DOI:	10.1016/j.geb.2010.12.002
Journal or Publication Title:	Games Econ. Behav.
Volume:	73
Number:	1
Page Range:	S. 186 - 200
Date:	2011
Publisher:	ACADEMIC PRESS INC ELSEVIER SCIENCE
Place of Publication:	SAN DIEGO
ISSN:	1090-2473
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language INCOMPLETE CONTRACTS; MECHANISM DESIGN; OPTION CONTRACTS; REFERENCE POINTS; RENEGOTIATION; FAIRNESS; INVESTMENTS; OWNERSHIP; INFORMATION; COMPETITION Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/48973