In most of the contract theory literature, contracting costs are assumed either to be high enough to preclude certain forms of contracting, or low enough to permit any contract to be written. Similarly, researchers usually treat renegotiation as either costless or prohibitively costly. This...

This paper explores how the opportunity to recontract affects investment and trade in contractual relationships when it is assumed that renegotiation is costly. In this world, recontracting retains much of the benefit that has been ascribed to it, including the realization of any surplus that is...

In preventative health decisions, such as the decision to undergo an invasive screening test or treatment, people may be deterred from selecting the test because its perceived disutility relative to not testing is greater than the utility associated with prevention of possible disease. The...

This paper uses a principal/agent framework to analyze consumer bankruptcy. The bankruptcy discharge partly insures risk-averse borrowers against bad income realizations but also reduces the borrower's incentive to avoid insolvency. Among our results are the following: (a) high bankruptcy...