Theoretical isolation in contract theory: suppressing margins and entrepreneurship
We discuss contract theory from a combined Austrian/new institutional view. In the latter view, the world is seen as shot through with ignorance and transaction costs, but, as a tendency, entrepreneurial activity responds to the problems caused by these. All modelling must critically reflect this. This ontological commitment is contrasted to various isolations characteristic of contract theory, specifically the modelling strategy of introducing often ad hoc and unexplained constraints that suppress margins and possibilities of entrepreneurial actions that would be open to real-world decision-makers. We illustrate this by means of, for example, the treatment of asymmetric information under complete contracting and the notion of control rights under incomplete contracting.
Volume (Year): 7 (2001)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RJEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RJEC20|
When requesting a correction, please mention this item's handle: RePEc:taf:jecmet:v:7:y:2001:i:3:p:313-339. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst)
If references are entirely missing, you can add them using this form.