Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In

Oliver D. Hart and John Moore

No 10397, NBER Working Papers from National Bureau of Economic Research, Inc

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 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.

JEL-codes: D8 D23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-reg
Date: 2004-03
Note: CF
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w10397.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

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)
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: http://EconPapers.repec.org/RePEc:nbr:nberwo:10397

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10397
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().