Scott E. Masten
University of Michigan, Stephen M. Ross School of Business
University of Michigan Law School, Working Paper No. 99-003
This entry discusses alternative theories of contract choice and design with special emphasis on (i) the interaction between contract design and contract enforcement and (ii) the explanatory power of alternative theories. After discussing the primary functions of contract, the entry reviews the assumptions and implications for contract design of the three dominant approaches to contracting in economics. An overview of the empirical literature on contracting and contractual choice identifies the main empirical regularities and their relation to the theory. A final section addresses implications for contract law and enforcement and directions for future research.
Number of Pages in PDF File: 27
JEL Classification: D23, K12, D82
Date posted: January 1, 1999