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dc.contributor.author
Herweg, Fabian
dc.contributor.author
Karle, Heiko
dc.contributor.author
Müller, Daniel
dc.date.accessioned
2021-03-10T12:06:47Z
dc.date.available
2017-06-11T19:23:18Z
dc.date.available
2021-03-10T08:08:41Z
dc.date.available
2021-03-10T12:06:47Z
dc.date.issued
2014-03
dc.identifier.issn
0265-8003
dc.identifier.uri
http://hdl.handle.net/20.500.11850/104324
dc.description.abstract
We consider a simple trading relationship between an expectation-based loss-averse buyer and profit-maximizing sellers. When writing a long-term contract the parties have to rely on renegotiations in order to ensure materially efficient trade ex post. The type of the concluded long-term contract affects the buyer's expectations regarding the outcome of renegotiation. If the buyer expects renegotiation always to take place, the parties are always able to implement the materially efficient good ex post. It can be optimal for the buyer, however, to expect that renegotiation does not take place. In this case, a good of too high quality or too low quality is traded ex post. Based on the buyer's expectation management, our theory provides a rationale for ``employment contracts'' in the absence of non-contractible investments. Moreover, in an extension with non-contractible investments, we show that loss aversion can reduce the hold-up problem.
en_US
dc.language.iso
en
en_US
dc.publisher
Centre for Economic Policy Research
en_US
dc.subject
Behavioral Contract Theory
en_US
dc.subject
Expectation-Based Loss Aversion
en_US
dc.subject
Incomplete Contracts
en_US
dc.subject
Renegotiation
en_US
dc.title
Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
en_US
dc.type
Working Paper
ethz.journal.title
CEPR Discussion Papers
ethz.pages.start
DP9874
en_US
ethz.size
57 p.
en_US
ethz.code.jel
JEL - JEL::C - Mathematical and Quantitative Methods::C7 - Game Theory and Bargaining Theory::C78 - Bargaining Theory; Matching Theory
en_US
ethz.code.jel
JEL - JEL::D - Microeconomics::D8 - Information, Knowledge, and Uncertainty::D86 - Economics of Contract: Theory
en_US
ethz.code.jel
JEL - JEL::D - Microeconomics::D0 - General::D01 - Microeconomic Behavior: Underlying Principles
en_US
ethz.publication.place
London
en_US
ethz.publication.status
published
en_US
ethz.leitzahl
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.::03795 - Bechtold, Stefan / Bechtold, Stefan
en_US
ethz.leitzahl.certified
ETH Zürich::00002 - ETH Zürich::00012 - Lehre und Forschung::00007 - Departemente::02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.::03795 - Bechtold, Stefan / Bechtold, Stefan
ethz.identifier.url
https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9874
ethz.date.deposited
2017-06-11T19:23:44Z
ethz.source
ECIT
ethz.identifier.importid
imp5936537b562b076535
ethz.ecitpid
pub:163163
ethz.eth
yes
en_US
ethz.availability
Metadata only
en_US
ethz.rosetta.installDate
2017-07-15T02:47:58Z
ethz.rosetta.lastUpdated
2022-03-29T05:41:34Z
ethz.rosetta.versionExported
true
ethz.COinS
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