Do contracts provide reference points that affect ex post behavior? 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...

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...

Partnerships are the prevalent organizational form in many industries. Profits are most frequently shared equally among the partners. The purpose of our paper is to provide a rationale for equal sharing rules. We show that with inequity averse partners the equal sharing rule is the unique...

The paper reports the first experimental study on people's fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of...

The paper reports the first experimental study on people's fairness views on extreme Income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of...

This paper investigates how people differentiate between inequality caused by talent and inequality caused by luck in a large-scale study of the US population. We establish that people distinguish significantly between inequality due to luck and inequality due to talent, even when controlling...

Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that "peer pressure'' mitigates the arising free-rider problem. This line of reasoning takes the equal sharing...

This paper studies whether people can avoid punishment by remaining willfully ignorant about possible negative consequences of their actions for others. We employ a laboratory experiment, using modified dictator games in which a dictator can remain willfully ignorant about the payoff...