More is Less by Maija Halonen-Akatwijuka
Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on 'contracts as reference points'. Including a contingency of the form, 'The buyer will require a good in event E', has a benefit and a cost. The benefit is that if E occurs there is less to argue about; the cost is that the additional reference point provided by the outcome in E can hinder (re)negotiation in states outside E. We show that if parties agree about a reasonable division of surplus, an incomplete contract is strictly superior to a contingent contract. If parties have different views about the division of surplus, an incomplete contract can be superior if including a contingency would lead to divergent reference points.| SKU | Unavailable |
| ISBN 13 | 9781009396073 |
| ISBN 10 | 1009396072 |
| Title | More is Less |
| Author | Maija Halonen-Akatwijuka |
| Series | Elements In Law Economics And Politics |
| Condition | Unavailable |
| Binding Type | Paperback |
| Publisher | Cambridge University Press |
| Year published | 2024-05-23 |
| Number of pages | 34 |
| Cover note | Book picture is for illustrative purposes only, actual binding, cover or edition may vary. |
| Note | Unavailable |