Buch, Englisch, 34 Seiten, Format (B × H): 152 mm x 273 mm, Gewicht: 70 g
Why Parties May Deliberately Write Incomplete Contracts
Buch, Englisch, 34 Seiten, Format (B × H): 152 mm x 273 mm, Gewicht: 70 g
Reihe: Elements in Law, Economics and Politics
ISBN: 978-1-009-39607-3
Verlag: Cambridge University Press
Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on 'contracts as reference points'. Including a contingency of the form, 'The buyer will require a good in event ', has a benefit and a cost. The benefit is that if occurs there is less to argue about; the cost is that the additional reference point provided by the outcome in can hinder (re)negotiation in states outside. We show that if parties agree about a reasonable division of surplus, an incomplete contract is strictly superior to a contingent contract. If parties have different views about the division of surplus, an incomplete contract can be superior if including a contingency would lead to divergent reference points.
Autoren/Hrsg.
Weitere Infos & Material
1. Introduction; 2. The model; 3. Is more less?; 4. Large gains in event; 5. Summary and conclusions; Appendix; References.
