Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on...

Parties often regulate their relationships through “continuing” contracts that are neither long-term nor short-term but usually roll over. We study the trade-off between long-term, short-term, and continuing contracts in a two period model where gains from trade exist in the first period,...

Parties often regulate their relationships through “continuing” contracts that are neither long‐term nor short‐term but usually roll over: a leading example is a standard employment contract. We argue that what distinguishes a continuing contract from a short‐term (or fixed‐term)...

The author analyzes the allocation of foreign aid to various sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information, donors may concentrate too much on priority sectors, leaving lower-priority yet...