A party dissatisfied with the contractual performance of a counterparty is typically able to pursue a variety of legal recourses. Within this apparent variety are two fundamental alternatives. The aggrieved party may (i) 'affirm' the contract and seek money damages or specific performance, or...

We show that parties in bilateral trade can rely on the default common law breach remedy of ‘expectation damages’ to simultaneously induce first-best relationship-specific investments of both the selfish and the cooperative kind. This can be achieved by writing a contract that specifies a...

If a seller delivers a good nonconforming to contract, European and US warranty laws allow consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer may use nonconformity as a pretext for getting rid of a...

no abstract available.

no abstract available.

If a seller delivers a good nonconforming to contract, European and US warranty laws allow consumers to choose between some money transfer and termination. Termination rights are, however, widely criticized, mainly for fear that the buyer may use nonconformity as a pretext for getting rid of a...

When investments are nonverifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling "expectation damages" close to legal practice, we show that the commonly applied remedy of US contract law induces the first best. Yet, to...

Recent evidence from the field (Hossain and List, 2009) suggests that contracts framed in terms of a loss (a deduction is taken for failing to meet a threshold) lead to greater effort than contracts framed in terms of a gain (a bonus is given for meeting a threshold). We investigate two...