Bigoni, Maria ORCID: 0000-0001-5988-6115, Bortolotti, Stefania ORCID: 0000-0002-8326-5447, Parisi, Francesco and Porat, Ariel ORCID: 0000-0002-3492-694X (2017). Unbundling Efficient Breach: An Experiment. J. Empir Leg. Stud, 14 (3). S. 527 - 548. HOBOKEN: WILEY. ISSN 1740-1461

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Abstract

Current law and economics scholarship analyzes efficient breach cases monolithically. The standard analysis holds that breach is efficient when performance of a contract generates a negative total surplus for the parties. However, by simplistically grouping efficient breach cases as of a single kind, the prior literature overlooks that gain-seeking breaches might be different from loss-avoiding breaches. To capture these different motives, we designed a novel game called the Contract-Breach Game where we exogenously varied the reasons for the breachpursuing a gain or avoiding a lossunder a specific performance remedy. Results from an incentivized laboratory experiment indicate that the motives behind the breach induce sizable differences in behavior; subjects are less willing to renegotiate when facing gain-seeking than loss-avoiding breaches, and the compensation premium obtained by the promisee is higher. Our analysis suggests that inequality aversion is an important driver of our results; indeed, inequality-averse subjects accept low offers more often in cases of loss-avoiding breaches than gain-seeking breaches. These results give us insight into the preferences and expectations of ordinary people in a case of a breach.

Item Type: Journal Article
Creators:
CreatorsEmailORCIDORCID Put Code
Bigoni, MariaUNSPECIFIEDorcid.org/0000-0001-5988-6115UNSPECIFIED
Bortolotti, StefaniaUNSPECIFIEDorcid.org/0000-0002-8326-5447UNSPECIFIED
Parisi, FrancescoUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
Porat, ArielUNSPECIFIEDorcid.org/0000-0002-3492-694XUNSPECIFIED
URN: urn:nbn:de:hbz:38-221115
DOI: 10.1111/jels.12154
Journal or Publication Title: J. Empir Leg. Stud
Volume: 14
Number: 3
Page Range: S. 527 - 548
Date: 2017
Publisher: WILEY
Place of Publication: HOBOKEN
ISSN: 1740-1461
Language: English
Faculty: Unspecified
Divisions: Unspecified
Subjects: no entry
Uncontrolled Keywords:
KeywordsLanguage
CONTRACT; COMPETITIONMultiple languages
LawMultiple languages
Refereed: Yes
URI: http://kups.ub.uni-koeln.de/id/eprint/22111

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