Boot, Arnoud W A; Greenbaum, Stuart I; Thakor, Anjan V - In: American Economic Review 83 (1993) 5, pp. 1165-83
The authors explain the use of legally unenforceable, discretionary financial contracts in circumstances where legally enforceable contracts are feasible. A discretionary contract allows a contracting party to choose whether or not to honor the contract. It is shown that such a contract...