Corporations allocate to their corporate governance structures authority over a large part of the transactions they carry out, both regulated by (incomplete) labour contracts or by (incomplete) arm's length contracts. These contracts, as the eventuality of unforeseen contingencies is...

We develop a model of strategic contractual incompleteness that identifies conditions under which principals might omit even costlessly verifiable terms. We then use experiments to test comparative statics predictions of the model. While it is well known that verifiability imperfections can...

This paper shows how a socially and environmentally aware firm principal can motivate a profit-oriented manager to pursue positive environmental, social, and governance (ESG) outcomes. In the model, the manager produces a verifiable output that creates social costs but also engages in an...