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Incomplete Contracts and Signalling Author info | Abstract | Publisher info | Download info | Related research | Statistics Kathryn E. Spier
This article presents a principal-agent model in which asymmetric information leads to contractual incompleteness. I show that in the presence of transactions costs, incompleteness may act as a signal of the principal's type. Two types of transactions costs are considered: those incurred ex ante (drafting costs) and those incurred ex post (enforcement or verification costs). I prove that in the presence of either of these costs asymmetric information leads to more contractual incompleteness than full information does.
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Article provided by The RAND Corporation in its journal RAND Journal of Economics .
Volume (Year): 23 (1992)
Issue (Month): 3 (Autumn)
Pages: 432-443
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Handle: RePEc:rje:randje:v:23:y:1992:i:autumn:p:432-443Contact details of provider: Web page: http://www.rje.org
Order Information: Web: http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi
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