Agreeing now to agree later: contracts that rule out but do not rule in

Oliver Hart and John Moore

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are "ruled out". Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on the list are not "ruled out". A "loose" contract (long list) maximizes flexibility but may interfere with ex ante investment incentives. When these incentives are important enough, the parties may write a "tight" contract (short list), even though this leads to ex post inefficiency.

Keywords: Agreements to agree; ruling out but not ruling in; bargaining; ex post inefficiency (search for similar items in EconPapers)
JEL-codes: D23 D8 K12 L22 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2004-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://eprints.lse.ac.uk/19316/ Open access version. (application/pdf)

Related works:
Working Paper: AGREEING NOW TO AGREE LATER: Contracts that Rule Out but do not Rule In (2004)
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
Working Paper: Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In (2004)
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:ehl:lserod:19316

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().