More is Less : Why Parties May Deliberately Write Incomplete Contracts Paperback / softback
by Maija (University of Bristol) Halonen-Akatwijuka, Oliver (Harvard University) Hart
Part of the Elements in Law, Economics and Politics series
Paperback / softback
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Description
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 E', has a benefit and a cost.
The benefit is that if E occurs there is less to argue about; the cost is that the additional reference point provided by the outcome in E can hinder (re)negotiation in states outside E.
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.
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Pre-OrderFree UK DeliveryThis title is available for pre-order
- Format:Paperback / softback
- Pages:34 pages, Worked examples or Exercises
- Publisher:Cambridge University Press
- Publication Date:23/05/2024
- Category:
- ISBN:9781009396073
Information
-
Pre-OrderFree UK DeliveryThis title is available for pre-order
- Format:Paperback / softback
- Pages:34 pages, Worked examples or Exercises
- Publisher:Cambridge University Press
- Publication Date:23/05/2024
- Category:
- ISBN:9781009396073