Header

UZH-Logo

Maintenance Infos

Reference points, social norms, and fairness in contract renegotiations


Bartling, Björn; Schmidt, Klaus M (2015). Reference points, social norms, and fairness in contract renegotiations. Journal of the European Economic Association, 13(1):98-129.

Abstract

How does an ex-ante contract affect behavior in an ex-post renegotiation game? We address this question in a canonical buyer–seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and economically important
impact on renegotiation behavior that goes beyond the effect of contracts on bargaining threat points. We compare situations in which an initial contract is renegotiated to strategically equivalent bargaining situations in which no ex-ante contract was written. The ex-ante contract causes sellers to ask for markups that are 45% lower than in strategically equivalent bargaining situations without an
initial contract. Moreover, buyers are more likely to reject given markups in renegotiations than in negotiations. These effects do not depend on whether the contract was written under competitive or monopolistic conditions. Our results provide strong evidence supporting the hypothesis that contracts serve as reference points that shape and coordinate the expectations of the contracting parties.

Abstract

How does an ex-ante contract affect behavior in an ex-post renegotiation game? We address this question in a canonical buyer–seller relationship with renegotiation. Our paper provides causal experimental evidence that an initial contract has a highly significant and economically important
impact on renegotiation behavior that goes beyond the effect of contracts on bargaining threat points. We compare situations in which an initial contract is renegotiated to strategically equivalent bargaining situations in which no ex-ante contract was written. The ex-ante contract causes sellers to ask for markups that are 45% lower than in strategically equivalent bargaining situations without an
initial contract. Moreover, buyers are more likely to reject given markups in renegotiations than in negotiations. These effects do not depend on whether the contract was written under competitive or monopolistic conditions. Our results provide strong evidence supporting the hypothesis that contracts serve as reference points that shape and coordinate the expectations of the contracting parties.

Statistics

Citations

7 citations in Web of Science®
8 citations in Scopus®
Google Scholar™

Altmetrics

Downloads

4 downloads since deposited on 03 Feb 2015
2 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Renegotiation, bargaining, reference points, contracts, competition
Language:English
Date:February 2015
Deposited On:03 Feb 2015 16:53
Last Modified:11 Dec 2016 01:00
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:1542-4766
Additional Information:The definitive version is available at www3.interscience.wiley.com
Publisher DOI:https://doi.org/10.1111/jeea.12109

Download

Preview Icon on Download
Preview
Content: Accepted Version
Filetype: PDF
Size: 340kB
View at publisher

TrendTerms

TrendTerms displays relevant terms of the abstract of this publication and related documents on a map. The terms and their relations were extracted from ZORA using word statistics. Their timelines are taken from ZORA as well. The bubble size of a term is proportional to the number of documents where the term occurs. Red, orange, yellow and green colors are used for terms that occur in the current document; red indicates high interlinkedness of a term with other terms, orange, yellow and green decreasing interlinkedness. Blue is used for terms that have a relation with the terms in this document, but occur in other documents.
You can navigate and zoom the map. Mouse-hovering a term displays its timeline, clicking it yields the associated documents.

Author Collaborations