This paper examines management contracts as a paradigm for the application of relational contracts theory and especially of the theory of contractual and relational norms. This theory, deriving from Macauley's implications, but structured and analysed by I.R. MacNeil gives us a framework for the...

After a contract is signed, contracting partners may engage in opportunistic behavior that circumvents the original intention of the agreement governing their business relationship (i.e. complying with the letter but not the spirit of the contract). We use an incomplete contracts approach to...

Contracts involving promises to commit criminal acts are ordinarily unenforceable. Yet nonenforcement does not fully deter incentives to form criminal agreements. This Article demonstrates that partial enforcement can generate greater deterrence incentives by disrupting the trust relationship...

This paper argues that academics, politicians, and the media have six commonly held but misguided beliefs about corporate governance. While Armstrong, Guay, and Weber (2010) discuss some of these misconceptions, a wider recognition that these beliefs are actually “myths” is important. They...

Inter-firm R&D collaborations through contractual arrangements have become increasingly popular, but in many cases they are broken up without any joint discovery. We provide a rationale for the breakup date in R&D collaboration agreements. More specifically, we consider a research consortium...

Employees learn from performing their tasks, and in the process they accumulate potentially portable human capital. If companies cannot commit to specific task assignments, they may have an incentive to assign workers to tasks that reduce the cost of retaining them but do not maximize their...

Oliver Hart and Bengt Holmström were awarded the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their fundamental contributions to contract theory. This article offers a short summary and discussion of their path breaking work.

This paper develops a positive model of informal contracting in which rewards and punishments are not determined by an ex ante optimal plan but instead express the ex post moral sentiments of the arbitrating party. We consider a subjective performance evaluation problem in which a principal can...

We examine the impact of economic deregulation on employer evasion of union-mandated "formal" wage-contracts in an import-competing industry. We show that, if the state maintains industrial employment despite import liberalisation, through cheaper credit to firms, then employer evasion will...