Efficiently Imprecise Contracts

Toru Suzuki

No 2020/07, Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: Actual contracts are often written in an imprecise manner. This paper introduces a formal writing cost framework in which the language of a contract, i.e., natural language, is explicitly modeled with predicate logic. It is shown that even if any obligation is contractible and describable by the language, the equilibrium contract can exhibit two kinds of impreciseness: (i) descriptive impreciseness, i.e., a contract leaves some relevant detail of the duty unmentioned, and (ii) semantic impreciseness, i.e., a contract uses some imprecise words leaving room for interpretation. Contractual impreciseness can persist even under a vanishingly small writing cost. Some novel comparative statics and other economic applications are provided.

Keywords: A foundation of incomplete contract; contractual impreciseness; writing cost; predicate logic (search for similar items in EconPapers)
Pages: 48 pages
Date: 2020-09-02
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.uts.edu.au/sites/default/files/2020-09 ... %20Toru%20Suzuki.pdf (application/pdf)

Related works:
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:uts:ecowps:2020/07

Access Statistics for this paper

More papers in Working Paper Series from Economics Discipline Group, UTS Business School, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford ().