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Cover of: Damage Measures for Contract Breach when Buyers Have Reference-Dependent Preferences
Tim Friehe, Christoph Rössler

Damage Measures for Contract Breach when Buyers Have Reference-Dependent Preferences

Section: Articles
Volume 178 (2022) / Issue 1, pp. 54-79 (26)
Published 20.12.2021
DOI 10.1628/jite-2022-0002
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  • 10.1628/jite-2022-0002
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Summary
Using the traditional law-and-economics production contract model with a fixed price, this paper analyzes the breach and reliance incentives that result from damage measures for breach of contract when buyers have reference-dependent preferences. We show that buyer's reference-dependent preferences can produce results at odds with the traditional portrayal. Importantly, we find that expectation damages are no longer generally superior to reliance damages.