Arbeitspapier

Indenture as a Commitment Device in Self-Enforced Contracts: An Experimental Test

How can a principal (an agent) ensure that an agent (a principal) will work (pay up), if payment (work) precedes work (payment)? When a banknote is torn in two, each part is by itself worthless. A principal can pre-commit to payment-on-delivery, by tearing a banknote and giving the agent the first half as "prepayment"; the agent receives the completing half upon delivery of the service. This contract design is known as "indenture". It is self-enforcing and incentive-compatible. This paper experimentally tests the efficacy of the "indenture game" and its implications for cooperation in oneshot environments. We find that cooperation rates are high and stable over time. Its efficacy is moderated by expected losses due to the existence of uncooperative types.

Sprache
Englisch

Erschienen in
Series: Discussion Paper ; No. 241

Klassifikation
Wirtschaft
Design of Experiments: Laboratory, Individual
Labor Contracts
Altruism; Philanthropy; Intergenerational Transfers
Thema
Cooperation
Experiment
Contracts
Indenture
Reciprocity
Agency Theory
Spieltheorie
Anreizvertrag
Experiment
Theorie

Ereignis
Geistige Schöpfung
(wer)
Kritikos, Alexander S.
Tan, Jonathan H. W.
Ereignis
Veröffentlichung
(wer)
European University Viadrina, Department of Business Administration and Economics
(wo)
Frankfurt (Oder)
(wann)
2005

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Kritikos, Alexander S.
  • Tan, Jonathan H. W.
  • European University Viadrina, Department of Business Administration and Economics

Entstanden

  • 2005

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