S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Economics, Norwegian School of Economics (NHH) Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)

No 2/2012:
Do non-enforceable contracts matter? Evidence from an international lab experiment.

Alexander W. Cappelen (), Rune Jansen Hagen (), Erik Ø. Sørensen () and Bertil Tungodden ()

Abstract: Many verifiable contracts are impossible or difficult to enforce. This applies to contracts among family and friends, contracts regulating market transactions, and sovereign debt contracts. Do such non-enforceable contracts matter? We use a version of the trust game with participants from Norway and Tanzania to study repayment decisions in the presence of non-enforceable loan contracts. Our main finding is that the specific content of the contract has no effect on loan repayment. Rather, the borrowers seem to be motivated by other moral motives, which contributes to explaining why they partly fulfill non-enforceable contracts. We also show that some borrowers violate the axiom of first order stochastic dominance when rejecting loan offers, which partly may reflect negative reciprocity, but also seems to reflect a fundame tal aversion against uncertainty.

Keywords: Non-enforceable contracts; Lab experiment.; (follow links to similar papers)

JEL-Codes: C91; D63; D80; F34; (follow links to similar papers)

20 pages, February 12, 2012, Revised April 3, 2012

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

DWSDownload.aspx?File=%2f ... on+papers%2f2012%2f02.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Dagny Hanne Kristiansen ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:nhheco:2012_002 This page was generated on 2014-12-14 19:25:07