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Renegotiating Incomplete Contracts

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  • Ed Nosal

Abstract

I examine the welfare effects associated with having agents write incomplete contracts. When contracting parties are permitted to renegotiate existing contracts, I show that they will be able to design contracts that can implement the set of first-best allocations via renegotiation. Therefore, at least for the kind of economy that is examined here, incomplete contracts do not impair the optimality of production and exchange.

Suggested Citation

  • Ed Nosal, 1992. "Renegotiating Incomplete Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 20-28, Spring.
    • Handle: RePEc:rje:randje:v:23:y:1992:i:spring:p:20-28
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    Cited by:

    1. Chaserant, Camille, 2007. "Les fondements incomplets de l’incomplétude : Une revue critique de la théorie des contrats incomplets," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(2), pages 227-253, juin.
    2. Miceli, Thomas J., 1995. "Contract modification when litigating for damages is costly," International Review of Law and Economics, Elsevier, vol. 15(1), pages 87-99, January.

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