Economics at your fingertips  

Verifiability and Contract Enforcement: A Model with Judicial Moral Hazard

Murat Usman ()

The Journal of Law, Economics, and Organization, 2002, vol. 18, issue 1, 67-94

Abstract: I model the litigation of a contract containing a variable not observable by courts, hence nonverifiable, unless the rational and self-interested judge exerts effort. He values the correct ruling but dislikes effort. Judicial effort is discretionary. I show that effort cost is inconsequential--"always breach" is equilibrium for any effort cost. But there exists another equilibrium where a small breach rate is achieved even with significant effort costs. Maximal remedies for breach are not optimal. Because effort is discretionary, low effort cost increases breach. Pretrial negotiations can have a substantial negative impact on verifiability under arbitrarily small deviations from full rationality. Copyright 2002, Oxford University Press.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

The Journal of Law, Economics, and Organization is currently edited by Andrea Prat

More articles in The Journal of Law, Economics, and Organization from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2023-04-26
Handle: RePEc:oup:jleorg:v:18:y:2002:i:1:p:67-94