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From Walrasian General Equilibrium to Incomplete Contracts: Making Sense of Institutions

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  • Mehrdad Vahabi

    (UP8 - Université Paris 8 Vincennes-Saint-Denis, ROSES - Réformes et Ouverture des Systèmes Economiques post-Socialistes - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article explores the specific contribution of recent literature on incomplete contracts in comparison with the acontractual Walrasian general equilibrium as well as the complete optimal contracts of the Agency theory regarding the institutional identity of agents. It underlines a tension between the theoretical justification of contractual incompleteness on the one hand, and rationality postulate, on the other hand. It concludes the relevance of bounded rationality assumption and temporary equilibrium framework to overcome some logical incoherences of present incomplete contracts literature. This brings closer two important branches of new institutional economics, namely the Transaction Costs Economics and the Property Rights approach.

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  • Mehrdad Vahabi, 1999. "From Walrasian General Equilibrium to Incomplete Contracts: Making Sense of Institutions," Post-Print halshs-03704424, HAL.
  • Handle: RePEc:hal:journl:halshs-03704424
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03704424
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    Cited by:

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    2. Mehrdad Vahabi, 2001. "The Soft Budget Constraint: A Theoretical Clarification," Post-Print hal-00629160, HAL.
    3. Juli Radev, 2011. "Static and dynamic market disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 36-63.
    4. Mehrdad Vahabi, 2011. "Appropriation, violent enforcement, and transaction costs: a critical survey," Public Choice, Springer, vol. 147(1), pages 227-253, April.
    5. Vahabi,Mehrdad, 2019. "The Political Economy of Predation," Cambridge Books, Cambridge University Press, number 9781107591370, November.

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    More about this item

    Keywords

    New institutional economics; Walrasian General Equilibrium; agency theory; incomplete contracts; nouvelle économie institutionnelle; équilibre général walrasien; théorie de l'agence; contrats incomplets;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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