Transferring Trust: Reciprocity Norms and Assignment of Contract

Abstract

This paper presents four experiments testing the prediction that assignment of contract rights erodes the moral obligation to perform. The first three studies used an experimental laboratory game designed to model contractual exchange. Players in the games were less selfish with a previously-generous partner than with third-party player who had purchased the right to the original partner’s expected return. The fourth study used a web-based questionnaire, and found that subjects reported that they would require less financial incentive to breach an assigned contract than a contract held by the original promisee. The results of these four experiments provide support for the proposition that a permissible and apparently neutral transfer of a contractual right may nonetheless reduce the likelihood or quality of performance by weakening the norm of reciprocity.

Keywords: Contract, Weak Sanction, Social Norm