This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 92 No. 4 (September 2002)

AER Volume. 92, Issue 4 | leftPrevious ArticleNext Articleright

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Rigidity, Discretion, and the Costs of Writing Contracts

Article Citation

Battigalli, Pierpaolo, and Giovanni Maggi. 2002. "Rigidity, Discretion, and the Costs of Writing Contracts ." The American Economic Review, 92(4): 798-817.

DOI: 10.1257/00028280260344470

Abstract

In this paper we model contract incompleteness "from the ground up," as arising endogenously from the costs of describing the environment and the parties' behavior. Optimal contracts may exhibit two forms of incompleteness: discretion, meaning that the contract does not specify the parties' behavior with sufficient detail; and rigidity, meaning that the parties' obligations are not sufficiently contingent on the external state. The model sheds light on the determinants of rigidity and discretion in contracts, and yields rich predictions regarding the impact of changes in the exogenous parameters on the degree and form of contract incompleteness. (JEL D23, D8, L14)

Article Full-Text Access

Full-text Article

Authors

Battigalli, Pierpaolo
Maggi, Giovanni


American Economic Review



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - Forthcoming Articles

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us