Abstract
We investigate a simple buyer/seller transaction, which is governed by a non-binding contract. In a first treatment none of the two players has to adhere to the contract but in a second, incomplete information treatment the contract may be binding for the buyer. According to normative game theory no trade is expected in the first treatment, but full trade should be observed in the latter. Contrary, we find that efficiency of trade is quite similar in both settings. Our results strongly recommend to look out for a behaviorally founded contract theory.
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