Foundations of Incomplete Contracts.

In the last few years, a new area has emerged in economic theory, which goes under the heading of "incomplete contracting". However, almos since its inception, the theory has been under attach for its lack of rigorous foundations. In this paper, we evaluate some of the criticisms that have been made of the theory, in particular, those of Maskin and Tirole (1998a). In doing so, we develop a model that provides a rigorous foundation for the idea that contracts are incomplete.