In the last few years, a new area has emerged in economic theory, which goes under the heading of 'incomplete contracting.' However, almost since its inception, the theory has been under attack for its lack of rigorous foundations. In this paper, the authors evaluate some of the criticisms that...

This paper characterizes the choice rules that can be implemented when agents are unable to commit themselves not to renegotiate the mechanism. Copyright 1999 by The Review of Economic Studies Limited.

A risk-averse buyer and seller contract over the trade of an item. At the time of trading, they each privately know their value s and cost r respectively, but these are not known when the contract is drawn up. The contract specifies a Bayesian revelation mechanism for implementing a trading rule...