Cognition and incomplete contracts

Jean Tirole*

*Corresponding author for this work

Research output: Contribution to journalArticle

110 Scopus citations

Abstract

Thinking about contingencies, designing covenants, and seeing through their implications is costly. Parties to a contract accordingly use heuristics and leave it incomplete. The paper develops a model of limited cognition and examines its consequences for contractual design. (JEL D23, D82, D86, L22).

Original languageEnglish (US)
Pages (from-to)265-294
Number of pages30
JournalAmerican Economic Review
Volume99
Issue number1
DOIs
StatePublished - Mar 1 2009

ASJC Scopus subject areas

  • Economics and Econometrics

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