Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In / Oliver Hart, John Moore.

Format:

Book

Author/Creator:

Hart, Oliver.

Contributor:

National Bureau of Economic Research.

Moore, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10397.

NBER working paper series no. w10397

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Agreeing Now to Agree Later

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are ruled out'. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on the list are not ruled in'. A loose' contract (long list) maximizes flexibility but may interfere with ex ante investment incentives. When these incentives are important enough, the parties may write a tight' contract (short list), even though this leads to ex post inefficiency.

Notes:

Print version record

March 2004.