Work

Behaviorally efficient remedies: An experiment

Year: 2026

Type: article

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.

Source: International Review of Law and Economics

DOI: 10.1016/j.irle.2026.106321

Authors: Christoph Engel, Lars Freund

Institution: Max Planck Institute for Behavioral Economics

Language: English

Topic: Law, Economics, and Judicial Systems

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,990