Contextual Contracts: On a Context-sensitive Approach to Contract Theory

Prateek Goorha

Journal of Interdisciplinary Economics, 2018, vol. 30, issue 2, 191-209

Abstract: I propose a method for introducing ‘context’ within the contractual environment based on a simple and intuitive application of control theory. The approach permits looking at several interesting practical features of contracts, be they incomplete, complete or smart, within a single framework. I define a contextual environment with the help of an interaction between three distinct spaces: a market-based contractual space framed within a formal institutional space and an even larger cultural space. Each space is characterized by a governing law built on a selection of control mechanisms that differ in their approach as well as their reliance on information generated from feedback mechanisms. I suggest how these governing laws tie the contextual spaces together and present some ideas on how they evolve through their interactions with other spaces. JEL: D20, D86, P50, Z10

Keywords: Contract theory; institutions; control process theory; culture; context (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jinter:v:30:y:2018:i:2:p:191-209

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