the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories …)negotiation in states outside E. We show that if parties agree about a reasonable division of surplus, an incomplete contract can be … strictly superior to a contingent contract. …

We argue that a contract provides a reference point for a trading relationship: more precisely, for parties' feelings … permitted by the contract. A party who is shortchanged shades on performance. A flexible contract allows parties to adjust their …

contract fixing price works well in normal times since there is nothing to argue about. However, when value or cost is …

contract renegotiation, an optimum can be achieved by giving the seller the right to make a take‐it‐or‐leave‐it offer. However …, with shading, such a contract creates deadweight losses. We show that an optimal contract will limit the seller's offers …

gains from trade exist in the first period, and may or may not exist in the second period. A long-term contract that … second period. A short-term contract is disadvantageous since a new contract must be negotiated if gains from trade exist in … the second period. A continuing contract can be better. In a continuing contract there is no obligation to trade in the …