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Relational contracts as a foundation for contractual incompleteness

  • 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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    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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    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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    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. Surajeet Chakravarty & W. Bentley MacLeod, 2008. "Contracting in the Shadow of the Law," NBER Working Papers 13960, National Bureau of Economic Research, Inc.
    3. Pierpaolo Battigalli & Giovanni Maggi, 2004. "Costly Contracting in a Long-Term Relationship," Working Papers 04-33, New York University, Leonard N. Stern School of Business, Department of Economics.
    4. 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.
    5. Tirole, Jean, 2008. "Cognition and Incomplete Contracts," IDEI Working Papers 453, Institut d'Économie Industrielle (IDEI), Toulouse.
    6. 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.
    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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