Dual Anchors in the Shadow of the Future: How Renewal Expectations and Relational History Govern Behavior in Public Contracts

Abstract

This study extends relational contract theory by showing how behavioral reference points can be established through policy, not merely by formal terms or competition. We theorize that contracts are governed by dual anchors: backward-looking relational history and forward-looking renewal expectations. Analyzing 430 public legal service contracts, we find relational history increases prices in amendments, revealing its “dark side.” A non-binding renewal clause, however, significantly attenuates this effect. This soft institutional signal recalibrates perceived entitlements and constrains price increases by setting an interpretive reference point. Our findings provide behavioral micro-foundations for how institutions actively structure relational dynamics and demonstrate how procurement design can shape expectations to improve renegotiation outcomes.