Eliaz, K. and Spiegler, R. (2006) Contradiction as a form of contractual incompleteness. (ELSE Working Papers 227). ESRC Centre for Economic Learning and Social Evolution: London, UK.
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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.
| Type: | Working / discussion paper |
|---|---|
| Title: | Contradiction as a form of contractual incompleteness |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | http://else.econ.ucl.ac.uk/newweb/papers.php |
| Language: | English |
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