Download Can Splits Create Market Liquidity - Theory And Evidence by Anshumana And Kalay PDF

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By Anshumana And Kalay

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In the special case where the contracting parties have perfect information, Crawford (1988) shows that short-term contracting distorts investment decisions only when the efficient plan involves mainly sunk cost investment and the relationship plays a consumption smoothing role. In this case the main role for long-term contracts is to serve as a substitute for an efficient credit market. In a pure moral hazard principal-agent model, Chiappori et al. (1994) demonstrate that two conditions are necessary in order that there is no difference between what can be achieved by an optimal long-term contract and a series of spot contracts.

And Richter, Rudolf (1998), Institutions and Economic Theory: The Contribution of the New Institutional Economics. Ann Arbor, The University of Michigan Press. Gallanter, Marc (1981), ‘Justice in Many Rooms: Courts, Private Ordering, and Indigenous Law’, 19 Journal of Legal Pluralism, 1-47. Gallick, Edward C. (1984), Exclusive Dealing and Vertical Integration: The Efficiency of Contract in the Tuna Industry, Bureau of Economics Staff Report to the Federal Trade Commission, excerpted in Masten, Scott E.

In economic contract theories, courts mechanically enforce contract terms, and 32 Contractual Choice 4100 adjustments, if any, are accomplished through costless renegotiation. In law and economics, the courts, rather than the transactors, evaluate opportunities for adaptation and implement the necessary contractual modifications. In the typical scenario, one of the parties will find performance at the contractually specified price unprofitable and attempt to escape his contractual obligations, leading the other party to bring suit to enforce the contract.

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