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...

In this article, we analyze the canonical hold-up model of Hart and Moore under the assumption that the courts can verify delivery of the good by the seller. It is shown that no further renegotiation design is necessary to achieve the first best: simple option contracts, which give the seller...

This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece rate contracts. Many principals reward high efforts on both...

When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the...

The EU steps up its efforts to curb its territorial CO2-emissions. It is planning to introduce a carbon border adjustment mechanism (CBAM) to level the playing field and to raise own resources. However, unilateral European climate policy action, whether shored up with a CBAM or not, can only...