Behavioral contract theory

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    Abstract (may include machine translation)

    This review provides a critical survey of psychology-and-economics ("behavioraleconomics") research in contract theory. First, I introduce the theories of individual decision making most frequently used in behavioral contract theory, and formally illustrate some of their implications in contracting settings. Second, I provide a more comprehensive (but informal) survey of the psychology-and-economics work on classical contract-theoretic topics: moral hazard, screening, mechanism design, and incomplete contracts. I also summarize research on a new topic spawned by psychology and economics, exploitative contracting, that studies contracts designed primarily to take advantage of agent mistakes.

    Original languageEnglish
    Pages (from-to)1075-1118
    Number of pages44
    JournalJournal of Economic Literature
    Volume52
    Issue number4
    DOIs
    StatePublished - 1 Dec 2014

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