The procurement of complex projects is often plagued by large cost overruns. One important reason for these additional costs are flaws in the initial design. If the project is procured with a price-only auction, sellers who spotted some of the flaws have no incentive to reveal them early. Each...

Oliver Hart and Bengt Holmström were awarded the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their fundamental contributions to contract theory. This article offers a short summary and discussion of their path breaking work.

For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, a scoring auction implements the efficient allocation. If this...

In business and politics, gifts are often aimed at influencing the recipient at the expense of third parties. In an experimental study, which removes informational and incentive confounds, subjects strongly respond to small gifts even though they understand the gift giver’s intention. Our...

Pay What You Want (PWYW) and Name Your Own Price (NYOP) are customer driven pricing mechanisms that give customers (some) pricing power. Both have been used in service industries with high fixed costs to price discriminate without setting a reference price. Their participatory and innovative...

We analyze "Pay What You Want" as a business model for Open Access publishing by discussing motives leading authors to make voluntary contributions, potential benefits for publishers and present results from a field experiment at one publisher. Data from the field experiment indicate authors'...

Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for helping the least well-off is more important than inequity aversion. We show that these results...