Incomplete Contracts and Signalling
Year: 1992
Type: article
Abstract: This article Presents a principal-agent model in which asymmetric information leads to contractual incompleteness. I show that in the presence of transactions costs, incompleteness may act as a signal of the principal's type. Two types of transactions costs are considered: those incurred ex ante (drafting costs) and those incurred ex post (enforcement or verification costs). I prove that in the presence of either of these costs, asymmetric information leads to more contractual incompleteness than full information does.
Source: The RAND Journal of Economics
DOI: 10.2307/2555872
Author: Kathryn E. Spier
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2047314199