Determinants of contract completeness: An environmental regulatory application

There is a tradeoff that must be addressed any time a contract is written; whether or not to make a contract flexible but incomplete or rigid but comprehensive. This paper investigates the completeness of hydroelectric license contracts over a nearly three decade time span and finds that as environmental concerns increase, so does contract flexibility, ultimately confirming the predictions of transaction cost theory. The paper offers an interesting historical look at the development of the U.S. hydroelectric dam license as it ages over time and responds to growing environmental concerns. It also, in a novel empirical application, combines traditional regression analysis with insights from textual analysis and computational linguistics.