Rewards and punishments: informal contracting through social preferences

Artikel

This paper develops a positive model of informal contracting in which rewards and punishments are not determined by an ex ante optimal plan but instead express the ex post moral sentiments of the arbitrating party. We consider a subjective performance evaluation problem in which a principal can privately assess the contribution of an agent to the welfare of a broader group. In the absence of formal contingent contracts, the principal chooses ex post transfers that maximize her social preferences. We characterize the incentives induced by the principal's preferences, contrast them with ex ante optimal contracts, and derive novel testable predictions about the way externalities are internalized in informal settings.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 11 ; Year: 2016 ; Issue: 3 ; Pages: 1145-1179 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Organizational Behavior; Transaction Costs; Property Rights ; Economics of Contract: Theory ; Tort Law and Product Liability; Forensic Economics ; Illegal Behavior and the Enforcement of Law ; Firm Objectives, Organization, and Behavior: General
• Subject: Informal contracts ; social preferences ; fairness ; intent-based justice ; subjective performance evaluation ; no punishment without guilt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chassang, Sylvain ; Zehnder, Christian
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2016

Further information

• DOI: doi:10.3982/TE2063
• Handle: http://hdl.handle.net/10419/150303
• Last update: 10.03.2025, 11:43 AM CET