This paper offers an explanation of rationally incomplete contracts where incompleteness refers to unforeseen contingencies. Agents enter a relationship with two-sided moral hazard in which a commitment to discard parts of the joint resources may be ex ante efficient. This happens through costly...

If contract enforcers must be randomly selected from the same population and thus are as opportunistic as ordinary traders could a system of adjudication nevertheless increase the degree to which contractual obligations on large anonymous markets are fulfilled? Adopting an indirect evolutionary...

We show that the relative seniority of debt and managerial compensation has important implications on the design of remuneration contracts.Whereas the traditional literature assumes that debt is senior to remuneration, we show that this is frequently not the case according to bankruptcy...