No contract or unfair contract: What's better?

Lisa Bruttel and Gerald Eisenkopf

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2012, vol. 41, issue 4, 384-390

Abstract: We investigate the welfare implications of unfair incentive contracts in comparison with interactions without contracts. Reciprocal people should cooperate conditionally in the latter situation but punish unfairness by non-cooperation. We confirm that some people do cooperate conditionally in a sequential prisoner's dilemma. Furthermore, some subjects do not cooperate if they face an unfair incentive contract in a similar context. However, there is no correlation between these two types of reciprocity. At an aggregate level, all contracts – no matter how fair they are – improve welfare even if agents are conditionally cooperative.

Keywords: Contracts; Prisoner's dilemma; Experiment (search for similar items in EconPapers)
JEL-codes: C72 D23 D63 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:41:y:2012:i:4:p:384-390

DOI: 10.1016/j.socec.2012.04.014

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