Incomplete Contracts and Strategic Ambiguity
Why are observed contracts so often incomplete in the sense that they leave contracting parties' obligations vague or unspecified? Traditional answers to this question invoke transaction costs or bounded rationality. In contrast, the authors argue that such incompleteness is often an essential feature of a well-designed contract. Specifically, once some aspects of performance are unverifiable, it is often optimal to leave other verifiable aspects of performance unspecified. The authors explore the conditions under which this occurs, and investigate the structure of optimal contracts when these conditions are satisfied. Copyright 1998 by American Economic Association.
(This abstract was borrowed from another version of this item.)
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.economics.harvard.edu/journals/hier
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:harver:1787. 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: (Thomas Krichel)
If references are entirely missing, you can add them using this form.