Promises & Partnership

Gary Charness and Martin Dufwenberg

No 2003:3, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: We examine, experimentally and theoretically, how communication within a partnership may mitigate the problem (highlighted in contract theory) of hidden action. What is the form and content of the communication? Which model of decision-making can capture the impact of communication? We consider free-form communication, measure beliefs (about actions and beliefs), and examine which motivational forces influence subjects. We find they harbor belief-dependent preferences that can be captured using psychological game theory. In particular, agents are influenced by guilt aversion, which suggests a theory of why and how communication influences behavior in which statements of intent and resulting expectations play a special role. This has bearing on how to understand partnerships and contracts.

Keywords: Promises; partnership; contract theory; behavioral economics; hidden action; moral hazard; lies; social preferences; psychological game theory; guilt aversion; reciprocity; fairness (search for similar items in EconPapers)
JEL-codes: A13 B49 C72 C91 D63 D64 J41 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2003-02-13
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www2.ne.su.se/paper/wp03_03.pdf (application/pdf)

Related works:
Working Paper: Promises & Partnership (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2003_0003

Access Statistics for this paper

More papers in Research Papers in Economics from Stockholm University, Department of Economics Department of Economics, Stockholm, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Anne Jensen ( this e-mail address is bad, please contact ).