@TechReport{iza:izadps:dp2367,
            	author={Muehlheusser, Gerd},
            	title={Regulating Damage Clauses in (Labor) Contracts},
            	year={2006},
	month={Oct},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={2367},
            	url={https://www.iza.org/index.php/publications/dp2367},
	abstract={We analyze the role of damage clauses in labor contracts using a model in which a worker may want to terminate his current employment relationship and work for another firm. We show that the initial parties to a contract have an incentive to stipulate excessive damage clauses, which leads to ex post inefficiencies. This result is due to rent seeking motives a) between the contracting parties vis-à-vis third parties and b) among the contracting parties themselves. We then show that, by imposing an upper bound on the amount of enforceable damages, a regulator can induce a Pareto improvement; in some cases even the first best can be achieved.},
	keywords={asymmetric information;breach of contract;penalty doctrine;damage clauses;labor contracts},
            }