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  Behaviorally Efficient Remedies – An Experiment

Engel, C., & Freund, L. (2017). Behaviorally Efficient Remedies – An Experiment.

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Item Permalink: http://hdl.handle.net/11858/00-001M-0000-002D-CCCF-C Version Permalink: http://hdl.handle.net/11858/00-001M-0000-002D-CDA3-4
Genre: Paper

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 Creators:
Engel, Christoph1, Author              
Freund, Lars1, Author
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: remedies, breach of contract, specific performance, expectation damages, reliance damages, donation, experiment
 JEL: C91 - Laboratory, Individual Behavior
 JEL: D02 - Institutions: Design, Formation, Operations, and Impact
 JEL: D03 - Behavioral Microeconomics: Underlying Principles
 JEL: D61 - Allocative Efficiency; Cost–Benefit Analysis
 JEL: D62 - Externalities
 JEL: D64 - Altruism; Philanthropy
 JEL: H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
 JEL: K12 - Contract Law
 Abstract: Under common law, the standard remedy for breach of contract is expectation damages. Under continental law, the standard is specific performance. The common law solution is ex post efficient. But is it also ex ante efficient? We use experimental methods to test whether knowing that non-fulfilment will only lead to damages deters mutually beneficial trade. The design excludes aversion against others willfully breaking their promises. We find that there is indeed less trade if specific performance is not guaranteed, provided the preference for the traded commodity is sufficiently pronounced.

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 Dates: 2017
 Publication Status: Published online
 Pages: -
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2017/17
 Degree: -

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