While some argue that incomplete incentive contracts facilitate the self-enforcement of informal dealings, other authors submit that they substitute for or “crowd out” social norms supporting informal arrangements. We use experimental evidence to test these theories by manipulating the extent to which individuals transact repeatedly and the level of contract costs. We find that, by enforcing co...

(a) (Limited) Commitment and renegotiation (b) Payments and enforcement are chosen optimally as part of a PBNE (c) Information revelation (d) Stochastic versus deterministic contracts (debt is optimal when commitment is limited) 3. Enforcement and firm finance: Krasa, Sharma and Villamil [7] (a) The model (b) The effect of c on firm finance (c) The effect of η on firm finance

While some argue that incomplete contracts facilitate the self-enforcement of informal dealings, other authors submit that they substitute for or “crowd out” social norms supporting informal arrangements. We use experimental evidence to test these theories by manipulating the probability that buyers and sellers will continue transacting and contract costs. We find that, by enforcing contractibl...

the good faith and fair dealing jurisprudence in contracts has due influences not only in civil law but also in common law, particularly in united states: in uniform commercial code (ucc), restatement 2nd on contracts and it’s judicial precedent. meanwhile the definitions and scope of good faith, the fields of adoption and enforcement of it in common law defers from case law. development of thi...

As in traditional commerce, parties to a contract in ebusiness environments are expected to operate in good faith and comply with mutually agreed terms of contract. It may be the case however that deviation from the agreed contract obligations occur either intentionally or due to force majeure. In this paper we argue that there is value in providing various levels of automated support to deal w...

Financial markets crucially rely on the development of an infrastructure dedicated to the enforcement of contracts. Here we study the effects of limited enforcement capacity on financial contracting by proposing a new theory of costly state verification. In our model the principal contracts with a population of entrepreneurs, who borrow to finance risky projects under limited liability. To sust...