Contradiction as a form of Contractual Incompleteness

Dana Heller and Ran Spiegler

Economic Journal, 2008, vol. 118, issue 530, pages 875-888

Abstract: A simple model is presented, in which contradictory instructions are viewed as a type of contract incompleteness. The model provides a complexity-based rationale for contradictory instructions. If there are complexity bounds on the contract, there may be an incentive to introduce contradictions, leaving for another agent the task of interpreting them. The optimal amount of contradictions depends on the complexity bound, the conflict of interests with the interpreter and the institutional constraints on his interpretations. In particular, a higher complexity bound may result in a larger amount of contradictions. Copyright © The Author(s). Journal compilation © Royal Economic Society 2008.

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