Incomplete Contracts

The past decade has witnessed a growing interest in contract theories of various kinds. This development is partly a reaction to our rather thorough understanding of the standard theory of perfect competition under complete markets, but more importantly to the resulting realization that this paradigm is insufficient to accommodate a number of important economic phenomena. Studying in more detail the process of contracting — particularly its hazards and imperfections — is a natural way to enrich and amend the idealized competitive model in an attempt to fit the evidence better.