Incomplete contracts with disparity, uncertainty, information and incentives
Bibliographic Data
| ID | 21405024 |
|---|---|
| Authors | Susheng Wang (0000-0002-3305-8132, Shanghai University, corresponding author) |
| Year | 2024 |
| Volume | 97 |
| Issue | 2 |
| Pages | 347-389 |
| Publication date | 2024-09-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Theory and Decision (JOURNAL) |
| Journal identifiers | ISSN: 0040-5833 • E-ISSN: 1573-7187 |
| Publisher | Springer Science and Business Media LLC (PUBLISHER) |
| DOI | 10.1007/s11238-024-09976-w |
| OpenAlex | W4392359296 |
| Language | EN |
| References cited | 16 |
Cooperation among firms is governed by contracts. An interesting phenomenon is that some contracts are comprehensive while some are limited. This study tries to explain different levels of the incompleteness of contracts that firms choose to govern their cooperation with. We find that a limited contract is more efficient than a comprehensive contract if partners are highly disparate or product quality is largely uncertain, and vice versa. In contrast, if there are private information and incentives to invest in quality, a comprehensive contract is likely to be more efficient. These findings offer an understanding as to why incomplete contracts are so popular in practice
Actuarial science · Business · Complete information · Contract management · Contract theory · Contrast (vision) · Economics · Incentive · Incomplete contracts · Industrial organization · Information asymmetry · Microeconomics · Phenomenon · Private information retrieval · Product (mathematics) · Quality (philosophy) · Auction Theory and Applications · Computer Science · Experimental Behavioral Economics Studies · Law, Economics, and Judicial Systems · Marketing
| Highly cited | No |
|---|