Contradiction as a form of contractual incompleteness

Dana Heller, Ran Spiegler

Research output: Contribution to journalArticlepeer-review

Abstract

A simple model is presented, in which contradictory instructions are viewed as a type of contract incompleteness. The model provides a complexity-based rationale for contradictory instructions. If there are complexity bounds on the contract, there may be an incentive to introduce contradictions, leaving for another agent the task of interpreting them. The optimal amount of contradictions depends on the complexity bound, the conflict of interests with the interpreter and the institutional constraints on his interpretations. In particular, a higher complexity bound may result in a larger amount of contradictions.

Original languageEnglish
Pages (from-to)875-888
Number of pages14
JournalEconomic Journal
Volume118
Issue number530
DOIs
StatePublished - Jul 2008

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