Making it personal: breach and private ordering in a contract farming experiment

Sebastian Kunte, Meike Wollni and Claudia Keser

European Review of Agricultural Economics, 2017, vol. 44, issue 1, 121-148

Abstract: In a laboratory experiment, we study behaviour in a contract farming game without third-party enforcement but with an external spot market as outside option. We examine if and how relational contracts and personal communication support private-order enforcement. We find mixed evidence for our private ordering hypothesis. While relational contracting significantly reduces contract breach in general, the possibility for ‘direct bargaining communication’ has no additional positive effect. Both parties benefit from a well-functioning relation in the long run, yet most subjects are not willing to sacrifice short-term gains. If reputational mechanisms are absent, premiums are offered (but not paid).

Keywords: contract farming; private-order enforcement; relational contracts; communication; economic experiments (search for similar items in EconPapers)
JEL-codes: D02 L14 Q13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Working Paper: Making it personal: breach and private ordering in a contract farming experiment (2014)
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