Title: Incompleteness as a Constraint in Contract Design
Abstract: We develop a model that encompasses both the incomplete contracts that are used in practice and the idealized complete contracts that address all contingencies. The objectives of the paper are: (i) to identify properties of agents’ preferences that determine whether or not incompleteness causes inefficiency; (ii) to examine the extent of the inefficiency caused by the constraint of contractual incompleteness; (iii) to analyze the implications of the incompleteness constraint on optimal contracts in principal-agent and bilateral bargaining models.
Publication Year: 2001
Publication Date: 2001-01-01
Language: en
Type: article
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Cited By Count: 8
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