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From Walrasian general equilibrium to incomplete contracts : making sense of institutions

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  • Vahabi, Mehrdad

Abstract

This article explores the specific contribution of recent literature on incomplete contracts in comparison with the acontractual Walrasian general equilibrium as well as the complete optimal contracts of the Agency theory regarding the institutional identity of agents. It underlines a tension between the theoretical justification of contractual incompleteness on the one hand, and rationality postulate, on the other hand. It concludes the relevance of bounded rationality assumption and temporary equilibrium framework to overcome some logical incoherences of present incomplete contracts literature. This brings closer two important branches of new institutional economics, namely the Transaction Costs Economics and the Property Rights approach.

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  • Vahabi, Mehrdad, 2008. "From Walrasian general equilibrium to incomplete contracts : making sense of institutions," MPRA Paper 37887, University Library of Munich, Germany, revised 2002.
    • Handle: RePEc:pra:mprapa:37887
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    Cited by:

    1. Vahabi, Mehrdad, 2003. "La contrainte budgétaire lâche et la théorie économique [Soft Budget Constraint and Economic Theory]," MPRA Paper 17651, University Library of Munich, Germany.
    2. Mehrdad Vahabi, 2011. "Appropriation, violent enforcement, and transaction costs: a critical survey," Public Choice, Springer, vol. 147(1), pages 227-253, April.
    3. Mehrdad Vahabi, 2001. "The Soft Budget Constraint: A Theoretical Clarification," Post-Print hal-00629160, HAL.
    4. Juli Radev, 2011. "Static and dynamic market disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 36-63.
    5. Vahabi,Mehrdad, 2019. "The Political Economy of Predation," Cambridge Books, Cambridge University Press, number 9781107591370.

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    More about this item

    Keywords

    Incomplete contracts; Judge bounded rationaly; Agent's bounded rationality; Asymmetric information; Walrasian general equilibrium;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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