Journal article

Putting relational contract theory to the test: experimental evidence

Nisvan Erkal, Steven Y Wu, Brian E Roe

EXPERIMENTAL ECONOMICS | SPRINGER | Published : 2021

Abstract

We investigate a number of canonical predictions that arise from relational contract theory. Employing an experimental design with endogenous choice of contract type, we find considerable experimental support for several well-established predictions, including the importance of self-enforcement and individual rationality constraints for contractual performance; a preference for informal agreements when third-party verification of performance is coarse; and a tendency toward strategic ambiguity (Bernheim and Whinston Am Econ Rev 902–932). However, two findings that appear to be inconsistent with theory are that (1) contractually specified performance levels do not appear to respond to the dis..

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University of Melbourne Researchers

Grants

Awarded by USDA-NIFA


Awarded by HATCH project


Funding Acknowledgements

Funding from USDA-NIFA grant number 2010-65400-20430 and HATCH project IND010580 are gratefully acknowledged. Roe recognizes support from the McCormick Program at the Ohio State University. The financial sponsors of this research played no role in the study design, the collection and analysis/interpretation of the data, the writing of the article, and the decision to submit the article for publication. This research is not the result of a for-pay consulting relationship.