This paper explores the possibility for efficient long term contracts among traders with changing and privately known incentives for exchange. We analyze a negotiation process that enables parties to adapt the default rules of exchange to changes in their preferences for trade. The selection of...

Contract interpretation is an important subject for lawyers but there are few rigorous economic analyses. We use a formal model to derive the interpretive rule that an “ideal” legal enforcer would adopt. Commercial parties make contracts to maximize gains from trade. Our enforcer is ideal,...

We study the effect of legal constraints in an environment in which agents face demand shocks they would like to smooth, but the agents also have weakness of will: their long and short run preferences are misaligned. Some agents are sophisticated - they know they will make inconsistent...

In a common commercial pattern, the seller of a standard product contracts with one buyer and then sells to another at the contract price after the initial buyer breaches. Sellers argue, and courts largely agree, that the seller could have served the contract buyer as well as the later buyer;...