In this paper, based on the incomplete contract perspective, we select the implementation of the Electronic Commerce Law of the People's Republic of China as a quasi-natural experiment to study the tax compliance incentive effects of platform firms. Our study finds that the Chinese experience...

The productivity of smallholder coffee cultivation is declining due to ageing trees, making the rejuvenation of coffee trees with superior seeds essential. This rejuvenation process requires the support and participation of various stakeholders, including the government, banks, investors,...

Many business relationships begin with informal interactions and later transition to formal contracts. Using a repeated-games model with a finite horizon, we show that this hybrid-contracting approach can both prolong cooperation (intensive margin) and enable it across a broader range of...

In this paper, based on the incomplete contract perspective, we select the implementation of the Electronic Commerce Law of the People's Republic of China as a quasi-natural experiment to study the tax compliance incentive effects of platform firms. Our study finds that the Chinese experience...

Theory suggests that by lending to a firm, inside banks gain an informational advantage over non-lender outside banks. This informational gap hinders borrowers from switching lenders due to a winner's curse faced by competing outside banks, leading to hold-up problems. In this paper, we show...

A common justification for shareholder primacy is that shareholders' financial interests give them an incentive to pursue projects that increase social welfare. This alignment of interests occurs because shareholders hold a residual claim on firm value: Because they receive only what remains...

This paper builds a model of dynamic tournaments under incomplete contract situations to analyze how the government, as a national development strategy, induces incentives or forms of competition between multiple companies (between state-owned enterprises (SOEs), between private-owned...

We study a moral hazard model in which the output is stochastically determined by both the agent's hidden effort and an uncertain state of the world. We investigate how the contractibility of the ex-post realization of the state affects the principal's incentive to provide information. While...

Explicit and implicit incentives and opportunities for mutually beneficial voluntary cooperation co-exist in many contractual relationships. In a series of eight laboratory gift-exchange experiments, we show that incentive contracts can lead to crowding out of voluntary cooperation even after...

We investigate the role of mutual trust in long-term vertical relationships involving trades of complex goods. High complexity is associated with high contract incompleteness and hence the increased relevance of trust-based relational contracts. Contrary to expectations, we find that changes in...

We investigate how the incompleteness of an employment contract - discretionary and non-contractible effort - can affect an employer's decision about cutting nominal wages. Using matched employer-employee payroll data from Great Britain, linked to a survey of managers, we find support for the...

We study a repeated principal-agent model with transferable utility, where the principal's evaluation of the agent's performance is subjective. Our focus is on equilibria which are robust to the addition of small privately observed shocks to the payoffs. Existing constructions of positive-effort...

The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the...

A principal incentivizes an agent to maintain compliance and to truthfully announce any breaches of compliance. Compliance is imperfectly controlled by the agent's private effort choices, is partially persistent, and is verifiable by the principal only through costly inspections. We show that in...

Explicit and implicit incentives and opportunities for mutually beneficial voluntary cooperation co-exist in many contractual relationships. In a series of eight laboratory gift-exchange experiments, we show that incentive contracts can lead to crowding out of voluntary cooperation even after...

"Implicit Contracts, incentive compatibility, and involuntary unemployment" (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract...

The lack of property rights in joint projects can cause hold-up problems, as expected fights over the proceeds make investing not worthwhile. We investigate theoretically and experimentally if the availability of different contractual sharing rules can solve the hold-up problem. As theory...

Relational contracting (RC) is an important yet little understood governance of transactions that provides more stability than the spot market and more flexibility than vertical integration. Employing transaction data on a large vegetable wholesale market in China, we study RC alongside a...

In the property rights approach to the theory of the firm, ownership matters if parties have to make partly relationship-specific investments, but ownership would be irrelevant if the investments were completely relationship-specific. We show that if negotiations after the investment stage...

Consumers are at a disadvantage when it comes to standard-form contracts – information gaps, weak bargaining power, and behavioral biases all work against them. Moreover, in the digital age, consumers do not even try to read the lengthy contracts they instantaneously approve. Manipulation by...

Most major jurisdictions require websites to provide customers with privacy policies. A privacy policy’s most important function is to provide consumers with a description of the online service provider’s current privacy practices. We argue that these policies also serve a second,...

This study introduces a hold-up cost (i.e., the cost of acquiring information regarding a transacting partner's relationship-specific investment to substantiate the need for contract renegotiation) in the model of the property-rights theory. As is widely accepted, the costs of accessing relevant...

Transparency is a promising means for enhancing democratic values, countering corruption, and reducing power abuse. Nonetheless, the potential of transparency in the domain of consumer contracts is untapped. This Article suggests utilizing the power of transparency to increase consumer access to...

Relational contracts - informal self-enforcing agreements sustained by repeated interactions - are ubiquitous both within and across organizational boundaries. This review highlights recent empirical contributions in selected areas. We begin by reviewing some recent work that explicitly takes...

Businesses often engage in long-term relationships with firms and people they trust and know, in which they informally sell and exchange information and services (Baker, Gibbons, & Murphy, 2002). As postulated by Arrow (1972, p. 357), "virtually every commercial trans-action has within itself an...