IDEAS home Printed from https://ideas.repec.org/p/ags/quedwp/273253.html

Limited Rationality and Endogenously Incomplete Contracts

Author

Listed:
  • Lipman, Barton L.

Abstract

The purpose of this paper is to provided a simple model in which limited rationality endogenously generates incomplete contracts. I model limited rationality as in Lipman [1991,1992], focusing on the idea that boundedly rational agents do not necessarily know every implication of their knowledge, but may, at a cost, compute these implications. This assumption implies the existence of subjective uncertainty in addition to the objective uncertainty the agents are contracting over. The presence of noncontractable subjective uncertainty can lead to contracts which are incomplete with respect to the contractable objective uncertainty. The most surprising result is that strategic bargaining over contracts can lead to incomplete contracts even with infinitesimal computation costs.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lipman, Barton L., 1992. "Limited Rationality and Endogenously Incomplete Contracts," Queen's Economics Department Working Papers 273253, Queen's University - Department of Economics.
    • Handle: RePEc:ags:quedwp:273253
    DOI: 10.22004/ag.econ.273253
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/273253/files/qed_wp_858.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.273253?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Suzuki, Toru, 2025. "Efficiently imprecise contracts: The role of conventionality," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    3. Toru Suzuki, 2020. "Efficiently Imprecise Contracts," Working Paper Series 2020/07, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    4. Mehrdad Vahabi, 1999. "From Walrasian General Equilibrium to Incomplete Contracts: Making Sense of Institutions," Post-Print halshs-03704424, HAL.
    5. M’hand Fares, 2005. "Quels fondements à l’incomplétude des contrats?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(3), pages 535-555.
    6. Holm, Hakan J., 1995. "Computational cost of verifying enforceable contracts," International Review of Law and Economics, Elsevier, vol. 15(2), pages 127-140, June.
    7. Luca Anderlini & Leonardo Felli, "undated". "Costly Coasian Contracts," Penn CARESS Working Papers c5b2efc4326ca8bb8162440d6, Penn Economics Department.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:quedwp:273253. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.