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Contracts as reference points: A replication

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  • Hippel, Svenja
  • Hoeppner, Sven

Abstract

We replicate two treatments of an experimental theory test (Fehr et al., 2011) studying Hart and Moore (2008)’s idea that contracts serve as reference points in trading relationships. In contrast to rigid contracts, flexible contract terms may be perceived in a self-serving manner and, therefore, the contract parties might form subjective entitlements. This reference-dependent perception of flexible contract terms leads to a trade-off of the contractual form. While flexible contracts are, in theory, deemed preferable to rigid contracts, frustrated subjective entitlements may lead to perfunctory performance and shading behavior that is absent in rigid contracts. The results of our replication are mixed. Our findings imply further support for Hart and Moore (2008)’s contracts as reference point hypothesis. However, our replication does not provide reliable evidence for the idea that competition creates objectivity and enhances perceived fairness of the contract terms.

Suggested Citation

  • Hippel, Svenja & Hoeppner, Sven, 2021. "Contracts as reference points: A replication," International Review of Law and Economics, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:irlaec:v:65:y:2021:i:c:s0144818820301861
    DOI: 10.1016/j.irle.2020.105973
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    References listed on IDEAS

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    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
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    More about this item

    Keywords

    Contract theory; Reference points; Self-serving bias; Laboratory experiment; Replication; Bayesian statistics;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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