Bilateral Relationships Governed by Incomplete Contracts

Mehmet Bac

Journal of Institutional and Theoretical Economics (JITE), 1997, vol. 153, issue 2, 320-

Abstract: This paper explores implications of interactions between concontractibility of quality, multidimensional hidden information, switching costs and the frequency of trade on the terms of contracts in a buyer-seller setup. Optimal contractual arrangements are showm to consist of a sequence of two contracts with nondecreasing prices and nonincreasing quality and volume of exchange. In the absence of switching costs, an increase in the frequency of trade is absorbed by the first contract. For high frequencies of trade, switching costs may enhance welfare by improving the efficiency of screening through a better allocation of time between contracts.

JEL-codes: L14 (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.ingentaconnect.com/content/mohr/jite/1997/00000153/00000002/art00002 (text/html)
Fulltext access is included for subscribers to the printed version.

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:mhr:jinste:urn:sici:0932-4569(199706)153:2_320:brgbic_2.0.tx_2-t

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().