Relational Contracting: Complementarities with Behavioral and Experimental Economics

This paper argues that experimental and behavioral economics complement traditional approaches to studying relational contracting, for two reasons. First, experiments have advantages in identifying core elements of relational contracting theory, despite limitations. Second, insights from experimental and behavioral economics suggest ways to expand or modify standard assumptions of relational contracting. The paper highlights studies illustrating these complementarities, including one testing predictions on involuntary unemployment through laboratory experiments. Another set of studies explores the benefits of social group membership in fostering successful relationships.