Are non-binding contracts really not worth the paper?
Bernd Irlenbusch ()
Managerial and Decision Economics, 2006, vol. 27, issue 1, 21-40
We experimentally investigate behavior in sequential one-shot transactions which are governed by non-binding contracts. In a second, incomplete information treatment, contracts are binding for some players. While according to traditional game-theoretical analysis no trade is expected in the first treatment, full trade should result in the latter. However, we find that trade is even higher in the non-binding contract treatment. On the one hand, non-binding contracts-although they are cheap talk-do guide behavior, especially at the beginning of a business relationship, while reciprocal reactions prevail later on. On the other hand, in the treatment with binding contracts cooperative behavior appears to be crowded out. Copyright © 2005 John Wiley & Sons, Ltd.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
http://hdl.handle.net/10.1002/mde.1243 Link to full text; subscription required (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:27:y:2006:i:1:p:21-40
Access Statistics for this article
Managerial and Decision Economics is currently edited by Antony Dnes
More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().