EconPapers    
Economics at your fingertips  
 

Courts’ Decisions, Cooperative Investments, and Incomplete Contracts

Alessandro De Chiara

The Journal of Legal Studies, 2025, vol. 54, issue 1, 117 - 164

Abstract: Buyers may try to motivate their sellers to make relationship-specific investments to reduce the probability that the design of the goods they procure is defective. In some countries, courts examine how much real authority the seller had in performing the work in their assignment of liability for a design failure. I show that the approach followed by courts induces the sellers to underinvest and the buyers to underspecify the design of the goods. I explore efficiency-based justifications for this approach, such as the facilitation of optimal relational contracting and the provision of incentives to engage in noncontractible coordinating activities.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/730424 (application/pdf)
http://dx.doi.org/10.1086/730424 (text/html)
Access to the online full text or PDF requires a subscription.

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:ucp:jlstud:doi:10.1086/730424

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2025-03-20
Handle: RePEc:ucp:jlstud:doi:10.1086/730424