Incomplete contracts: Where do we stand?

Jean Marcal Pierre Tirole

Research output: Contribution to journalArticlepeer-review

503 Scopus citations

Abstract

The paper takes stock of the advances and directions for research on the incomplete contracting front. It first illustrates some of the main ideas of the incomplete contract literature through an example. It then offers methodological insights on the standard approach to modeling incomplete contracts; in particular it discusses a tension between two assumptions made in the literature, namely rationality and the existence of transaction costs. Last, it argues that, contrary to what is commonly argued, the complete contract methodology need not be unable to account for standard institutions such as authority and ownership; and it concludes with a discussion of the research agenda.

Original languageEnglish (US)
Pages (from-to)741-781
Number of pages41
JournalEconometrica
Volume67
Issue number4
DOIs
StatePublished - Jan 1 1999

Keywords

  • Authority
  • Incomplete contracts
  • Transaction costs
  • Unforeseen contingencies

ASJC Scopus subject areas

  • Economics and Econometrics

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