A Characterization of Verifiability and Observability in Contracts

Nicola Dimitri ()
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Nicola Dimitri: Department of Political Economy and Statistics, University of Siena, Piazza San Francesco 7, 53100 Siena, Italy

International Game Theory Review (IGTR), 2018, vol. 20, issue 02, 1-15

Abstract: Reference to the notions of verifiability and observability is widespread in contract theory. This paper is a contribution towards a formalization, and related characterizations, of these two notions. In particular we first define them, through knowledge operators, and then provide characterization results in terms of the relevant state spaces. Since, when referring to a contract, observability typically pertains to parties while verifiability to the court, we define them differently. A main finding of the paper is that for proper contract verifiability to obtain the court must imagine true states and have information processing abilities as good as the parties.

Keywords: Contracts; verifiability; observability (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S0219198917500323

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