The Law and Economics of Costly Contracting

Alan G. Schwartz, Joel Watson
{"title":"The Law and Economics of Costly Contracting","authors":"Alan G. Schwartz, Joel Watson","doi":"10.2139/ssrn.295659","DOIUrl":null,"url":null,"abstract":"In most of the contract theory literature, contracting costs are assumed either to be high enough to preclude certain forms of contracting or low enough to permit any contract to be written. Similarly researchers usually treat renegotiation as either costless or prohibitively costly. This article addresses the middle ground between these extremes, in which the costs of contracting and renegotiation can take intermediate values and the contracting parties can themselves influence these costs. The context for our analysis is the canonical problem of inducing efficient relation-specific investment and efficient ex post trade. Among our principle results are: (i) The efficiency and complexity of the initial contract are decreasing in the cost to create a contract. Hence the best mechanism design contracts can be too costly to write. (ii) When parties use the simpler contract forms, they require renegotiation to capture ex post surplus and to create efficient investment incentives. In some cases, parties want low renegotiation costs. More interesting is that, in other cases, parties have a strict preference for moderate renegotiation costs. (iii) The effect of contract law on contract form is significant but has been overlooked. In particular, the law's interpretive rules raise the cost of enforcing complex contracts, and thus induce parties to use simple contracts. Worse, the law also lowers renegotiation costs, which further undermines complex contracts and is also inappropriate for some of the simpler contracts. Copyright 2004, Oxford University Press.","PeriodicalId":171240,"journal":{"name":"Yale Law School","volume":"30 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2001-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"114","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Yale Law School","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.295659","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 114

Abstract

In most of the contract theory literature, contracting costs are assumed either to be high enough to preclude certain forms of contracting or low enough to permit any contract to be written. Similarly researchers usually treat renegotiation as either costless or prohibitively costly. This article addresses the middle ground between these extremes, in which the costs of contracting and renegotiation can take intermediate values and the contracting parties can themselves influence these costs. The context for our analysis is the canonical problem of inducing efficient relation-specific investment and efficient ex post trade. Among our principle results are: (i) The efficiency and complexity of the initial contract are decreasing in the cost to create a contract. Hence the best mechanism design contracts can be too costly to write. (ii) When parties use the simpler contract forms, they require renegotiation to capture ex post surplus and to create efficient investment incentives. In some cases, parties want low renegotiation costs. More interesting is that, in other cases, parties have a strict preference for moderate renegotiation costs. (iii) The effect of contract law on contract form is significant but has been overlooked. In particular, the law's interpretive rules raise the cost of enforcing complex contracts, and thus induce parties to use simple contracts. Worse, the law also lowers renegotiation costs, which further undermines complex contracts and is also inappropriate for some of the simpler contracts. Copyright 2004, Oxford University Press.
昂贵合同的法律和经济学
在大多数合同理论文献中,合同成本要么被假定为高到足以排除某些形式的合同,要么低到足以允许签订任何合同。同样,研究人员通常认为重新谈判要么没有成本,要么代价高昂。本文讨论了这两个极端之间的中间地带,其中签订合同和重新谈判的成本可以取中间值,而签订合同的各方自己可以影响这些成本。我们分析的背景是诱导有效的特定关系投资和有效的事后贸易的典型问题。我们的主要结果包括:(i)初始合同的效率和复杂性随着创建合同的成本而降低。因此,最好的机制设计契约的编写成本可能太高。当各方使用较简单的合同形式时,它们需要重新谈判以获得事后盈余和创造有效的投资奖励。在某些情况下,各方希望降低重新谈判的成本。更有趣的是,在其他情况下,各方对适度的重新谈判成本有着严格的偏好。(三)合同法对合同形式的影响是重要的,但一直被忽视。特别是,法律的解释性规则提高了执行复杂合同的成本,从而诱使当事人使用简单合同。更糟糕的是,该法还降低了重新谈判的成本,这进一步破坏了复杂的合同,也不适合一些简单的合同。版权所有2004,牛津大学出版社。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
自引率
0.00%
发文量
0
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:604180095
Book学术官方微信