Contractual traps

11 years 5 months ago
Contractual traps
In numerous economic scenarios, contracting parties may not have a clear picture of all the relevant aspects. While confronted with these unawareness issues, the strategic decisions of the contracting parties critically depend on their sophistication. A contracting party may be unaware of what she and/or others are entitled to determine. Therefore, she can only infer some missing pieces via the contract offered by other parties to evaluate how reasonable the contract is. Further, a contracting party may actively gather information and collect evidence about all possible contingencies to avoid to be trapped into the contractual agreement. In this paper, we propose a general framework to investigate these strategic interactions with unawareness, reasoning, and cognition and intend to unify the solution concepts in the contracting context with unawareness. We build our conceptual framework upon the classical principal-agent relationship and compare the behaviors under various degrees of...
Ying-Ju Chen, Xiaojian Zhao
Added 27 May 2010
Updated 27 May 2010
Type Conference
Year 2009
Where TARK
Authors Ying-Ju Chen, Xiaojian Zhao
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