Renegotiating Incomplete Contracts

I examine the welfare effects associated with having agents write incomplete contracts. When contracting parties are permitted to renegotiate existing contracts, I show that they will be able to design contracts that can implement the set of first-best allocations via renegotiation. Therefore, at least for the kind of economy that is examined here, incomplete contracts do not impair the optimality of production and exchange.

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Year of publication:	1992
Authors:	Nosal, Ed
Published in:	RAND Journal of Economics. - The RAND Corporation, ISSN 0741-6261. - Vol. 23.1992, 1, p. 20-28
Publisher:	The RAND Corporation

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Extent:	application/pdf
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005732333