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Relational contracts as a foundation for contractual incompleteness

Author

Listed:
  • 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)

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.

Suggested Citation

  • Claudine Desrieux & Jean Beuve, 2011. "Relational contracts as a foundation for contractual incompleteness," Economics Bulletin, AccessEcon, vol. 31(3), pages 2030-2040.
  • Handle: RePEc:ebl:ecbull:eb-11-00193
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P183.pdf
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    References listed on IDEAS

    as
    1. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, vol. 99(1), pages 265-294, March.
    2. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
    3. 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.
    4. Pierpaolo Battigalli & Giovanni Maggi, 2008. "Costly contracting in a long-term relationship," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 352-377.
    5. Surajeet Chakravarty & W. Bentley MacLeod, 2009. "Contracting in the shadow of the law," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 533-557.
    6. Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-932, September.
    7. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean Beuve & Claudine Desrieux, 2016. "Repeated interactions and endogenous contractual incompleteness," Theory and Decision, Springer, vol. 80(1), pages 125-158, January.

    More about this item

    Keywords

    Contractual incompleteness; Relational Contract; Reputation; Repeated Games;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D2 - Microeconomics - - Production and Organizations

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