Incomplete Contracts and Renegotiation.
When drawing up a contract, it is often impracticable to specify all the relevant contingencies, and so contracts are typically incomplete. This paper considers the extent to which these gaps migh t be filled by building into the contract a mechanism for revising th e terms of trade. One conclusion is that because the par-ties can res cind the original contract and ne-gotiate a new one, severe limitatio ns are placed on the form the revisions can take. The authors charact erize the optimal revision mechanism both when the contract is used t o encourage relationship-specific investments and when it is used for risk sharing. Copyright 1988 by The Econometric Society.
Year of publication: |
1988
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Authors: | Hart, Oliver D ; Moore, John |
Published in: |
Econometrica. - Econometric Society. - Vol. 56.1988, 4, p. 755-85
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Publisher: |
Econometric Society |
Saved in:
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