Whom Does the Written Contract Protect?
Beijing Normal University - School of Economics and Business Administration
Southwestern University of Finance and Economics (SWUFE)
Written contracts result from inter-temporal transaction. Transaction means Pareto Improvement and consensus as well. But does it mean both of them or just one part has more incentive to get the promises down? This paper thinks that it is the potential victim of opportunism that insists the contract written down to ask for enforcement help from the third party when necessary. However, the possible opportunist is passive whether the contract should be written down. When the victim has the ability to enforce the contract on his own, he also wants a written contract to prove his innocence. But this motive contributes to excess supply of clauses of formatted contract.
Number of Pages in PDF File: 10
Keywords: Opportunism, Hold-up, Potential victim, Advantageous enforcement part, Formatted contract
JEL Classification: D02, D99, K12working papers series
Date posted: June 29, 2007
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