Reputations, relationships and the enforcement of incomplete contracts
By: by W. Bentley MacLeod
Series: Discussion paper -- no. 1978; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) -- no. 1978
Publisher: IZA
Published: 2006
Place of publication: Bonn, Germany
Language: eng
Format: [electronic resource] /
Subjects: Incomplete contracts
Description: "This paper discusses the literature on the enforcement of incomplete contracts. It compares legal enforcement to enforcement via relationships and reputations. A number of mechanisms, such as the repeat purchase mechanism (Klein and Leffler (1981)) and efficiency wages (Shapiro and Stiglitz (1984)), have been offered as solutions to the problem of enforcing an incomplete contract. It is shown that the efficiency of these solutions is very sensitive to the characteristics of the good or service exchanged. In general, neither the repeat purchase mechanism nor efficiency wages is the most efficient in the set of possible relational contracts. In many situations, total output may be increased through the use of performance pay and through increasing the quality of law"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Title from PDF file as viewed on 2/16/2006.

Includes bibliographical references.

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