American Economic Review Vol. 99 No. 1 2009

Cognition and Incomplete Contracts

Jean Tirole

Toulouse School of Economics, Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 allées de Brienne, 31000 Toulouse, France.

Abstract

Thinking about contingencies, designing covenants, and seeing through their implications is costly. Parties to a contract accordingly use heuristics and leave it incomplete. The paper develops a model of limited cognition and examines its consequences for contractual design.

DOI

10.1257/aer.99.1.265

Volume

99

Issue

1

Pages

265-294

Language

en

Sources

crossref bibtex:phds-export.bib openalex

Cite

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