Abstract
We use an experiment to study the effect of ex-post sharing rules on relationship-specific investments in an incomplete contracting context. We find that no power structure can induce first-best investments and that equally productive partners reach more efficient outcomes with a balanced power structure (i.e., equal sharing of returns) than with an asymmetric one. In addition, we find evidence for behavioural effects: partners make higher investments and reach higher efficiency levels than own-payoff maximisation would suggest. This behaviour is in line with a model where decision-makers care about social efficiency. It is not consistent with inequity-averse preferences.
| Item Type: | Journal article |
|---|---|
| Faculties: | Economics Economics > Chairs > CESifo-Professorship for Social Policy and Labor Markets |
| Subjects: | 300 Social sciences > 330 Economics |
| Language: | English |
| Item ID: | 20623 |
| Date Deposited: | 15. Apr 2014 09:00 |
| Last Modified: | 04. Nov 2020 13:01 |
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