The Economics of Contracts
Theories and Applications

A 2002 survey of economics of contracts appealing to scholars in economics, management and law.

Eric Brousseau (Edited by), Jean-Michel Glachant (Edited by)

9780521893138, Cambridge University Press

Paperback, published 17 October 2002

602 pages, 7 b/w illus. 16 tables
22.6 x 15 x 3.6 cm, 0.8 kg

A contract is an agreement under which two parties make reciprocal commitments in terms of their behavior to coordinate. As this concept has become essential to economics in the last 30 years, three main theoretical frameworks have emerged: 'incentive theory', 'incomplete-contract theory' and 'transaction-costs theory'. These frameworks have enabled scholars to renew both the microeconomics of coordination (with implications for industrial organization, labor economics, law and economics, organization design) and the macroeconomics of 'market' (decentralized) economies and of the institutional framework. These developments have resulted in new analyses of a firm's strategy and State intervention (regulation of public utilities, anti-trust, public procurement, institutional design, liberalization policies, etc.). Based on contributions by the leading scholars in the field, this 2002 book provides an overview of developments in these analytical currents, presents their various aspects, and proposes expanding horizons for theoreticians and practitioners.

Part I. Introduction: 1 Economics of contracts and renewal of economic analysis Eric Brousseau and Jean -Michel Glachant
Appendix: canonical models of three different theories of contract M'hand Fares
Part II. Contracts, Organizations and Institutions: 2. The new institutional economics Ronald Coase
3. Contract and economic organization Oliver Williamson
4. The role of incomplete contracts in self-enforcing relationships Benjamin Klein
5. Entrepreneurship, transaction costs and the design of contracts Erik G. Furubotn
Part III. Law and Economics: 6. The contract as economic exchange Jacques Ghestin
7. Contract theory and theories of contract regulation Alan Schwartz
8. Economic reasoning and the framing of contract law Victor Goldberg
9. A transactions costs approach to the analysis of property rights Gary Libecap
Part IV. Theoretical Developments: Where Do We Stand?: 10. Transaction costs in incentive theory David Martimort and Eric Malin
11. Norms and the theory of the firm Oliver Hart
12. Liquidity constraint and the allocation of control rights Philippe Aghion and Patrick Rey
13. Complexity and contract W. Bentley McLeod
14. Authority, as flexibility, is the core of labour contracts Olivier Favereau and Bernard Walliser
15. Positive agency theory: positioning and contribution Gerard Charreaux
Part V. Testing Contract Theories: 16. Econometrics of contracts: an assessment of developments in the empirical literature on contracting Scott Masten and Stéphanie Saussier
17. Experiments on moral hazard and incentives: reciprocity and surplus sharing Marc Willinger and Claudia Keser
Part VI. Applied Issues: Contributions to Industrial Organization: 18. Residual claimancy rights and ongoing rents as incentive mechanisms in franchise contracts: complements or substitutes? Francine Lafontaine and Emmanuel Raynaud
19. The quasi judicial role of large retailers Benito Arrunada
20. Interconnection agreements: strategic behaviour and property rights Godefroy Dang N'guyen and Thierry Penard
21. Licensing in the chemical industry Asish Aroroa and Andrea Fosfuri
Part VII. Policy Issues: Anti-trust and Regulation of Public Utilities: 22. Inter-industry agreements and European community competition law Michel Glais
23. Incentive contracts in utility regulation Matthew Bennett and Catherine Waddams Price
24. Contractual choice and performance: the case of water supply in France Claude Ménard and Stéphane Saussier
25. Institutional or structural reform: sequencing strategies for reforming the electricity industry Pablo Spiller and Guy Holburn
26. Electricity sector restructuring and competition Paul Joskow.

Subject Areas: Law [L], Business & management [KJ], Microeconomics [KCC], Economics [KC]