Experimental Analysis of Endogenous Institutional Choice: Constantly Revealing Versus Ad-Hoc Contracting

Ad-hoc contracting allows to quickly react changes which could be neglected or noticed too late in case of constant contracting. But always deciding anew, e.g., how much and what order commercial buy private life, is cumbersome. To capture the cognitive burden ad-hoc it can avoided by contracting, our setup confronts pricing, non-revealing, with constantly revealing pricing. The experiment modifies Acquiring-a-Company game reversing responsibility for pricing seller who proposes a price together cheap-talk value message and, demands surplus share all periodic interactions. lets sellers decide between prices non-revealing prices. Buyers, either aware seller’s only price, accept reject trade each several successive periods played same pair, buyer participant. Will opt already without experience pricing? And will one, when more experienced, has been profitable?