kaal:claim:2267560-033

Opportunistic behavior, transaction costs, and bounded rationality undermine comprehensive contracting, so contracting parties do not specify all of their respective obligations ex-ante because anticipating all contingencies is too costly.

Because it is too costly for contracting parties to anticipate all contingencies and to agree to necessary contract adaptations in advance (Williamson 1985), the contracting parties in the incomplete contract model do not specify all of their respective obligations under the contract ex-ante.

Wulf A. Kaal, Evolution of Law Dynamic Regulation in a New Institutional Economics Framework (2013), IV. Dynamic Regulation in the Incomplete Contract Model, p. 10
https://ssrn.com/abstract=2267560 · source PDF

Wulf A. Kaal, Evolution of Law Dynamic Regulation in a New Institutional Economics Framework (2013). SSRN: https://ssrn.com/abstract=2267560

failuresupport: arguedfailure: failure of comprehensive contractingfamily: agency-cost-and-managerial-opportunismeconomicsrisk-and-incentives

• generalizes kaal:claim:2992962-030 Problems with smart contracts are inevitable because of subjectivity in human relationships, bounded rationali...
• extended_by kaal:claim:5886442-016 Where human contracts remain radically incomplete because parties cannot specify responses to all future state...
• generalizes kaal:claim:kaal-2014-dynamicregulationviagove-005 Because transaction costs, imperfect information, and bounded rationality shape the rulemaking process, even s...

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