Behaviorally Efficient Remedies – An Experiment

26 Pages Posted: 20 Jun 2017 Last revised: 4 Sep 2017

See all articles by Christoph Engel

Christoph Engel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students; Universität Osnabrück - Faculty of Law

Lars Freund

Max Planck Institute for Research on Collective Goods

Date Written: September 1, 2017

Abstract

Under common law, the standard remedy for breach of contract is expectation damages. Under continental law, the standard is specific performance. The common law solution is ex post efficient. But is it also ex ante efficient? We use experimental methods to test whether knowing that non-fulfilment will only lead to damages deters mutually beneficial trade. The design excludes aversion against others willfully breaking their promises. We find that there is indeed less trade if specific performance is not guaranteed, provided the preference for the traded commodity is sufficiently pronounced.

Keywords: remedies, breach of contract, specific performance, expectation damages, reliance damages, donation, experiment

JEL Classification: C91, D02, D03, D61, D62, D64, H23, K12

Suggested Citation

Engel, Christoph and Freund, Lars, Behaviorally Efficient Remedies – An Experiment (September 1, 2017). MPI Collective Goods Preprint, No. 2017/17. Available at SSRN: https://ssrn.com/abstract=2988653 or http://dx.doi.org/10.2139/ssrn.2988653

Christoph Engel (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
+049 228 914160 (Phone)
+049 228 9141655 (Fax)

HOME PAGE: http://www.coll.mpg.de/engel.html

University of Bonn - Faculty of Law & Economics

Postfach 2220
D-53012 Bonn
Germany

Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

Burgemeester Oudlaan 50
PO Box 1738
Rotterdam
Netherlands

Universität Osnabrück - Faculty of Law

Osnabruck, D-49069
Germany

Lars Freund

Max Planck Institute for Research on Collective Goods ( email )

Kurt Schumacher Str 10
Bonn, 53113
Germany

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