We develop a model of strategic contractual incompleteness that identifies conditions under which principals might omit even costlessly verifiable terms. We then use experiments to test comparative statics predictions of the model. While it is well known that verifiability imperfections can...

This study examines legislation that would grant growers termination damages if their contracts are terminated. Our model suggests that, with no contracting frictions, damages would not reduce ex ante efficiency as processors can contract around damages through contract restructuring. Growers...

Using experimental economics, we compare the efficiency and welfare effects of tournaments and fixed performance contracts. Our subjects (agents) were generally better off under fixed performance contracts, but the advantage of the fixed performance contract disappears if the relative magnitude...