A matter of interpretation: Ambiguous contracts and liquidated damages

Simon Grant, J. Jude Kline and John Quiggin

Games and Economic Behavior, 2014, vol. 85, issue C, 180-187

Abstract: We consider the optimality of liquidated damages contracts in a setting of contractual ambiguity and potential for disputes. We show that when parties are ambiguity averse enough, they will optimally choose liquidated damages contracts and sacrifice risk sharing opportunities.

Keywords: Ambiguity; Bounded rationality; Expected uncertain utility; Incomplete contracts; Liquidated damages (search for similar items in EconPapers)
JEL-codes: D80 D82 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: A Matter of Interpretation: Ambiguous Contracts and Liquidated Damages (2012)
Working Paper: A Matter of Interpretation: Ambiguous Contracts and Liquidated Damages (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:85:y:2014:i:c:p:180-187

DOI: 10.1016/j.geb.2014.01.019

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