Motivated by markets for ''expertise,'' we study a bandit model where a principal chooses between a safe and risky arm. A strategic agent controls the risky arm and privately knows whether its type is high or low. Irrespective of type, the agent wants to maximize duration of experimentation with...

We use economic experiments to examine the nature of relational trading under a menu of incomplete contracts ranging from the repeat purchase mechanism of Klein and Leffler (1981) to highly incomplete contracts that are completely unenforceable by third-parties. Our results suggest that, with...

Incomplete information is an obstacle to deal-making. Information problems also exist as to ongoing matters in the parties’ relationship. That this is so is well known. But attention has focused largely on a subset of information problems where there is agreement on what the information is and...

Since Schelling's seminal work on bargaining, it has been a common intuition that two parties cannot form a contract with positive expectation damages (let alone one that is renegotiation proof), if outside of the contract each would have no interests in what the other would or could do. After...

Social preferences and formal contract enforcement are two mechanisms that facilitate performance of an agreement. The standard argument is that formal contracting substitutes when social preferences are lacking. We, alternatively, explore the hypothesis that social preferences and contract...

Current law and economics scholarship analyzes efficient breach cases monolithically. The standard analysis holds that breach is efficient when performance of a contract generates a negative total surplus for the parties. However, by simplistically grouping efficient breach cases as of a single...

We study the voting rules to modify, amend, and renegotiate syndicated loan contracts. We base our hypotheses on a model that shows how amendment thresholds can mitigate agency conflicts within the lending syndicate. Consistent with our model predictions, we find that voting rules are more...

It is well known that delegating the play of a game to an agent via incentive contracts may serve as a commitment device and hence provide a strategic advantage. Previous literature has shown that any Nash equilibrium outcome of an extensive-form principals-only game can be supported as a...