Contracts may be subject to strategic default, particularly if public enforcement
institutions are weak. In a lab experiment, we study behavior in a contract farming game
without third-party enforcement but with an external spot market as outside option. Two
players, farmer and company, may conclude a contract but also breach it by side-selling or
arbitrary payment reductions. We examine if and how relational contracts and personal
communication can support private-order enforcement. Moreover, we investigate whether
company players offer price premiums to extend the contract’s self-enforcing range. We find
mixed evidence for our private ordering hypothesis. Although contract breach can be reduced
by relational contracts, direct bargaining communication does not additionally improve
the outcome. Price premiums are offered if other enforcement mechanisms are absent,
but turn out to be only an “allurement”. Most subjects are not willing to sacrifice short-term
gains in favor of a well-functioning relationship that (as we show) would be beneficial for
both contract parties in the long run.