Contracts, Reference Points, and Competition - Behavioral Effects of the Fundamental Transformation

Details

Serval ID
serval:BIB_A648DAF482FA
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Contracts, Reference Points, and Competition - Behavioral Effects of the Fundamental Transformation
Journal
Journal of the European Economic Association
Author(s)
Fehr E., Hart O., Zehnder C.
ISSN
1542-4766
Publication state
Published
Issued date
04/2009
Peer-reviewed
Oui
Volume
7
Number
2-3
Pages
561-572
Language
english
Abstract
In this paper we study the role of incomplete ex ante contracts for ex post trade. Previous experimental evidence indicates that a contract provides a reference point for entitlements when the terms are negotiated in a competitive market. We show that this finding no longer holds when the terms are determined in a non-competitive way. Our results imply that the presence of a "fundamental transformation" (i.e., the transition from a competitive market to a bilateral relationship) is important for a contract to become a reference point. To the best of our knowledge this behavioral aspect of the fundamental transformation has not been shown before.
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Create date
05/06/2009 12:50
Last modification date
20/08/2019 15:11
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