Book Description

Contracts Are A Major Organizational Arrangement To Conduct Transactions. Economic Theory Has Been Making Attempts To Come To Grips With Four Pertinent Issues. Why Is Contracting Superior To Imperfect Markets And Hierarchical Control In Decentralized Organizations? What Basic Institutional Mechanisms Should Be In Place To Ensure Efficiency Of Contracts? What Determines The Choice Of Contract Forms (In Particular, The Behavioral Responses Of Self-Interest Seeking To Reactions Of Others) And Contract Parameters?Can Contracts Provide A Better Alternative To Regulated Markets? Keeping Information Asymmetry And Asset Specificity As The Focal Points This Book Deals With The Following Mechanisms Of Exchange-Markets (Including Transfer Prices), Contingent Claims Contracts, Incomplete And Incentive Contracts, And Implicit Contracts.The Emphasis Is On The Efficient Structuring Of Such Contracts And The Choice Of Suitable Contract Parameters. One Chapter Is Also Devoted To Trust And Informal Dimensions Of Contracts Since It Is Recognized That Defining And Enforcing Formal Contracts Becomes Difficult As Information Asymmetry And Asset Specificity Reach Their Limits. The Level Of Algebraic Complexity In The Derivations Is Kept To A Minimum To Make The Book Accessible To A Wide Audience.