Transactions of any complexity between buyers and sellers are supported by long-term contracts and these contracts are inevitably incomplete. We propose an approach for overcoming contractual incompleteness based on the idea that most people are inclined to follow widely accepted social norms,...

We use economic experiments to examine the nature of relational trading under a menu of incomplete contracts ranging from the repeat purchase mechanism of Klein and Leffler (1981) to highly incomplete contracts that are completely unenforceable by third-parties. Our results suggest that, with...

In this article I argue that it has been hard to make progress on Coase's theory of the firm agenda because of the difficulty of formalizing haggling costs. I propose an approach that tries to move things forward using the idea of aggrievement costs, and apply it to the question of whether a...

We study two parties who desire a smooth trading relationship under conditions of value and cost uncertainty. A rigid contract fixing price works well in normal times since there is nothing to argue about. However, when value or cost is exceptional, one party will hold up the other , damaging...

We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer's value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum can be achieved by giving...

This paper aims to define the conditions under which a specific performance contract can solve the hold-up problem. We mainly show two results. First, in a very general environment the efficient solution is achieved only with renegotiation design. Second, in a specific environment where the...

This article explores the specific contribution of recent literature on incomplete contracts in comparison with the acontractual Walrasian general equilibrium as well as the complete optimal contracts of the Agency theory regarding the institutional identity of agents. It underlines a tension...

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,...

At Thanksgiving 2018, while visiting his video-artist daughter, the author of this paper re-read Atlas Shrugged for the second time, 44 years after first reading, as described in a paper promulgated on SSRN in late January, 2019. Then a few weeks later, at Christmas 2018, while visiting his...

Property rights provide incentives to create information but also incentives to hoard it before award of protection. Even after award, others who might supplement that idea lack bargaining power until they too secure property rights. An unintended consequence is to slow, not hasten, progress...