ABSTRACT
This paper presents an incentivized experiment investigating whether parties place different intrinsic values on the two primary forms of contractual protection-damages and specific performance. In the first part of the experiment, participants are offered two contract options that are identical except for the remedy available in the event of breach. We elicit their valuations-specifically, their willingness to accept (WTA) and willingness to pay (WTP) – for each contract. To capture the perceived efficiency of each remedy, we introduce a novel ‘efficiency-revelation mechanism’ that interprets the gap between WTA and WTP as an indicator of participants’ underlying efficiency evaluations. In the second part of the experiment, we examine how the valuation and price paid or received for the chosen remedy affects the parties’ behavior during post-contractual renegotiation. The results offer practical guidance for contract design under conditions of market volatility and inform how much discretion courts and lawmakers should permit parties in customizing contractual remedies.
Parisi, Francesco, Bargaining for Remedies: An Efficiency-Revelation Mechanism (June 26, 2025), Minnesota Legal Studies Research Paper No 2025-32.
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