Social and Behavioral Sciences Commons^™

Promises And Expectations, Florian Ederer, Alexander Stremitzer

Cowles Foundation Discussion Papers

We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects. In a controlled laboratory experiment we show that exogenous variation of second-order expectations (promisors’ expectations about promisees’ expectations that the promise will be kept) leads to a significant change in promisor behavior. We provide clean evidence that a promisor’s aversion to disappointing a promisee’s expectation leads her to keep her promise. We propose a simple theory of lexicographic promise keeping that is supported by our results and nests the findings of previous contributions as special cases.

Promises And Expectations, Florian Ederer, Alexander Stremitzer

Cowles Foundation Discussion Papers

We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects. In a controlled laboratory experiment we show that exogenous variation of second-order expectations (promisors’ expectations about promisees’ expectations) leads to a significant change in promisor behavior. We provide evidence that a promisor’s aversion to disappointing a promisee’s expectation leads her to behave more generously. We propose and estimate a simple model of conditional guilt aversion that is supported by our results and nests the findings of previous contributions as special cases.

The Role Of Family Ties In Mitigating Moral Hazard: Firm-Level Evidence From Tamil Nadu, India, Goldie Chow

Goldie Chow

Drawing on firm-level data from the district of Coimbatore in Tamil Nadu, India, this study explores the role of family ties as a means to counteract potential moral hazard concerns. It is shown that firms will be more likely to employ family relations when faced with a higher hidden context for moral hazard. Specifically, the analysis finds that the presence of family members within the firm is higher when the firm provides general training and that firms that are more likely to do external business with family relations when it is believed that the legal system is not effective. Additionally, …

Contract Law And Modern Economic Theory, Daniel A. Farber

Daniel A Farber

No abstract provided.

Too Complex To Perceive?: Drafting Cash Distribution Waterfalls Directly As Code To Reduce Complexity And Legal Risk In Structured Finance, Master Limited Partnership, And Private Equity Transactions, Ralph Carter Mayrell

Ralph Carter Mayrell

The intricate procedural and data-driven decision trees that play a critical role in complex financial contracts like cash distribution waterfalls in structured finance agreement indentures (e.g., collateralized debt obligations (CDOs)), master limited partnership agreements, and private equity fund agreements are inefficiently depicted as written contracts. As Professor Henry Hu explains in Too Complex to Depict?, the difficulty of translation—or depiction—between original mathematical models, plain English prospectuses, legal contracts, and programmed execution means that often the written depictions that form the basis of disclosures do not accurately define the act of execution. To overcome this, the SEC proposed an amendment to …

Do Mlb Hitters Boost Performance In Their Contract Year?, Heather M. O'Neill

Business and Economics Faculty Publications

This study focuses on 256 MLB free agent hitters playing under the 2006-2011 CBA to determine whether they boost their offensive performance in their contract year. Prior studies’ results are mixed, depending on the econometric technique used and the choice of the offensive performance measure.

Having multiple year observations per player, one can incorporate the unobserved traits of the players (ability, risk aversion, work ethic, etc.) by using Fixed Effects (FE) estimation. Since these unmeasured player traits are likely to be correlated with observed predictors of performance (games played, playoff contention, age, etc.), traditionally used Ordinary Least Squares (OLS) and …

How To Create American Manufacturing Jobs, John D. Gleissner Esquire

John D Gleissner Esquire

No abstract provided.

Review Of The Book Incentives, Cooperation And Risk Sharing: Economic And Psychological Perspectives On Employment Contracts, Ronald G. Ehrenberg

Ronald G. Ehrenberg

[Excerpt] The current volume, which grew out of a two-day conference held at New York University in 1984, is an excellent introduction to compensation policy research and practice. A unique aspect of the volume is its interdisciplinary orientation; the contributors include academic economists and industrial psychologists, as well as practicing compensation and personnel and human resource specialists. A very readable introductory essay by the editor provides general discussion of analytical issues in compensation policy research and whets the reader's appetite for the papers that follow.

Unguaranteed Money In The Nfl: A Useful Tool For Risky Players, Wayne Simpson

Honors Theses

This study is investigating whether or not the percentage of non‐guaranteed money or length in NFL contracts reflects how risky players are as judged by past statistics. While sports economists have completed numerous studies on the motivational power of incentives, a study trying to identify the riskiness of players to lead to the strategic use of non‐guaranteed money and length of contract is a new idea. Contract details were gathered for running backs and wide receivers on NFL rosters for the 2012 season from rotoworld.com. Players who were still on rookie contracts and who were primarily special teams players were …

Waging War On Specialty Pharmaceutical Tiering In Pharmacy Benefit Design, Chad I. Brooker

Chad I Brooker

Specialty drugs represent a growing concern for both health insurance issuers and beneficiaries given their exceedingly high (and growing) costs—representing almost half of all drug spend by 2017. Payers have sought to reduce their specialty drug spend by sharing more of the cost of these drugs with the beneficiaries who depend on them through the creation of specialty drug tiers. This has forced some patients to choose between forgoing other needs to pay for their medications or not take them at all. While several states have sought to outlaw the use of specialty drug tiers or limit pharmaceutical OOP cost-sharing, …

Lasting Victories: Successful Union Strategies For Winning First Contracts, Kate Bronfenbrenner

Kate Bronfenbrenner

[Excerpt] These studies leave no doubt that employers have at their disposal a myriad of legal and illegal tactics which they can use to effectively block union efforts at winning a first agreement. The critical question to be answered is whether the same kind of grassroots, rank-and-file intensive union-building strategies that have been found to be so effective in certification and decertification elections are equally effective in overcoming employer opposition in first contract campaigns.

Successful Union Strategies For Winning Certification Elections And First Contracts: Report To Union Participants (Part 1: Organizing Survey Results), Kate Bronfenbrenner

Kate Bronfenbrenner

Summary of results from 1986-1988 survey of 261 lead organizers conducted by Kate Bronfenbrenner in cooperation with the Organizing Department of the AFL-CIO.

Successful Union Strategies For Winning Certification Elections And First Contracts: Report To Union Participants (Part 2: First Contract Survey Results), Kate Bronfenbrenner

Kate Bronfenbrenner

Summary of results from 1986-1988 survey of 100 chief negotiators conducted by Kate Bronfenbrenner in cooperation with the Organizing Department of the AFL-CIO.

Rise Of The Intercontinentalexchange And Implications Of Its Merger With Nyse Euronext, Latoya C. Brown

Latoya C. Brown, Esq.

This paper examines the impending merger between the IntercontinentalExchange (ICE) and NYSE Euronext against the backdrop of the current structure of the global financial services industry. The paper concludes that the merger embodies what the financial services industry is becoming and captures the model that will allow exchanges to remain competitive in today’s marketplace: mega-exchanges with broader asset classes and electronic platforms. As technology and globalization threaten their vitality, exchanges will need to continue reinventing and adapting. Increasingly over the last decade they have done so by merging and by moving, at least a part of, their operations on screen. …

The Psychology Of Contract Precautions, David A. Hoffman, Tess Wilkinson-Ryan

All Faculty Scholarship

This research tests the intuition that parties to a contract approach each other differently before the contract is formed than they do once it is finalized. We argue that one of the most important determinants of self-protective behavior is whether the promisee considers herself to be in negotiations or already in an ongoing contract relationship. That shift affects precaution-taking even when it has no practical bearing on the costs and benefits of self-protection: the moment of contracting is a reference point that frames the costs and benefits of taking precautions. We present the results of three questionnaire studies in which …