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Continuing Contracts
[“Firms’ Use of Outside Contractors: Theory and Evidence,”]

Author

Listed:
  • Maija Halonen-Akatwijuka
  • Oliver Hart

Abstract

Parties often regulate their relationships through “continuing” contracts that are not fixed term but roll over: employment is a leading example. Our premise is that parties apply fairness when they revise a continuing contract and that prior terms, together with market information, will be a reference point. A continuing contract can reduce (re)negotiation costs relative to a short-term or long-term contract. However, fair bargaining makes adjusting to outside options difficult and may cause inefficient outcomes. An implicit promise of a long-term relationship, as in employment, can improve matters. (JEL D23, D86, K12).

Suggested Citation

  • Maija Halonen-Akatwijuka & Oliver Hart, 2020. "Continuing Contracts [“Firms’ Use of Outside Contractors: Theory and Evidence,”]," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 36(2), pages 284-313.
    • Handle: RePEc:oup:jleorg:v:36:y:2020:i:2:p:284-313.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewz022
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    2. Tore Ellingsen & Eirik Gaard Kristiansen, 2022. "Fair and Square: A Retention Model of Managerial Compensation," Management Science, INFORMS, vol. 68(5), pages 3604-3624, May.

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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