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Relational contracts as a foundation for contractual incompleteness

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Author Info

  • Claudine Desrieux

    ()
    (ERMES and Laboratoire d''Economie du droit, University of Paris II Panthéon-Assas)

  • Jean Beuve

    ()
    (IAE - University of Paris 1 and University of Paris XI)

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    Abstract

    Contractual incompleteness is generally defined by a trade-off between costs and benefits. We examine this trade-off in a dynamic setting and show how the ability of the parties to sustain a relational contract leads to more incomplete contracts.

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P183.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 31 (2011)
    Issue (Month): 3 ()
    Pages: 2030-2040

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    Handle: RePEc:ebl:ecbull:eb-11-00193

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    Related research

    Keywords: Contractual incompleteness; Relational Contract; Reputation; Repeated Games;

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    References

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    1. Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-32, September.
    2. Pierpaolo Battigalli & Giovanni Maggi, 2008. "Costly contracting in a long-term relationship," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 352-377.
    3. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, vol. 99(1), pages 265-94, March.
    4. Surajeet Chakravarty & W. Bentley MacLeod, 2008. "Contracting in the Shadow of the Law," NBER Working Papers 13960, National Bureau of Economic Research, Inc.
    5. Kenneth S. Corts, 2004. "The Effect of Repeated Interaction on Contract Choice: Evidence from Offshore Drilling," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(1), pages 230-260, April.
    6. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
    7. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
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