Testing the Commitment Hypothesis in Contractual Settings: Evidence from Soccer

This paper designs and implements an empirical test to discern whether the parties to a contract are able to commit not to renegotiate their agreement. We study optimal contracts with and without commitment and derive an exclusion restriction that is useful to identify the relevant commitment scenario. The empirical analysis takes advantage of a data set on Spanish soccer player contracts. Our test rejects the commitment hypothesis. We argue that our conclusions should hold a fortiori in many other economic environments.