AGREEING NOW TO AGREE LATER: Contracts that Rule Out but do not Rule In

Oliver Hart and John Moore

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: 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 out". 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.

Keywords: Agreements to agree; ruling out but not ruling in; bargaining; ex post inefficiency. (search for similar items in EconPapers)
Date: 2004-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://sticerd.lse.ac.uk/dps/te/te472.pdf (application/pdf)

Related works:
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
Working Paper: Agreeing now to agree later: contracts that rule out but do not rule in (2004)
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:472

Access Statistics for this paper

More papers in STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().