Theory and Decision 46 (1):23-50 (1999)
This paper investigates, in a simple risk-sharing framework, the extent to which the incompleteness of contracts could be attributed to the complexity costs associated with the writing and the implementation of contracts. We show that, given any measure of complexity in a very general class, it is possible to find simple contracting problems such that, when complexity costs are explicitly taken into account, the contracting parties optimally choose an incomplete contract which coincides with the âdefaultâ division of surplus. Optimal contracts with complexity costs are constrained efficient in our model. We therefore interpret our results as saying that, in the absence of a strategic role for complexity costs, their effect is entirely determined by their size relative to the size of payoffs
|Keywords||Incomplete contracts Complexity measures Computability|
No categories specified
(categorize this paper)
References found in this work BETA
No references found.
Citations of this work BETA
Multi-Task Agency with Unawareness.Ernst-Ludwig von Thadden & Xiaojian Zhao - 2014 - Theory and Decision 77 (2):197-222.
Repeated Interactions and Endogenous Contractual Incompleteness.Jean Beuve & Claudine Desrieux - 2016 - Theory and Decision 80 (1):125-158.
Similar books and articles
The Costs and Benefits of a Separation of Powers - an Incomplete Contracts Approach.Kira Fuchs, Kira Boerner & Florian Herold - unknown
Effective Complexity as a Measure of Information Content.James W. McAllister - 2003 - Philosophy of Science 70 (2):302-307.
Complexity and Postmodernism: Understanding Complex Systems.Paul Cilliers - 1998 - Routledge.
Kolmogorov Complexity for Possibly Infinite Computations.Verónica Becher & Santiago Figueira - 2005 - Journal of Logic, Language and Information 14 (2):133-148.
Restricted Complexity, General Complexity.Edgar Morin - 2006 - In Carlos Gershenson, Diederik Aerts & Bruce Edmonds (eds.), [Book Chapter] (in Press). World Scientific. pp. 1--25.
What is Complexity? - The Philosophy of Complexity Per Se with Application to Some Examples in Evolution.Bruce Edmonds - 1995 - In [Book Chapter] (in Press).
Complexity: From Formal Analysis to Final Action.Douglas Frye & Philip David Zelazo - 1998 - Behavioral and Brain Sciences 21 (6):836-837.
Science, Computers, and the Complexity of Nature.Peter Caws - 1963 - Philosophy of Science 30 (2):158-164.
Complexity Theories, Social Theory, and the Question of Social Complexity.Peter Stewart - 2001 - Philosophy of the Social Sciences 31 (3):323-360.
Simply Complexity: A Clear Guide to Complexity Theory.Neil F. Johnson - 2009 - Oneworld.
Added to index2010-09-02
Total downloads44 ( #116,675 of 2,158,458 )
Recent downloads (6 months)5 ( #64,769 of 2,158,458 )
How can I increase my downloads?