Incomplete Contracts and Signaling

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Incomplete Contracts and Signaling

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Title: Incomplete Contracts and Signaling
Author: Spier, Kathryn E.
Citation: Kathryn E. Spier, Incomplete Contracts and Signaling, 23(3) RAND J. Econ. 432 (1992).
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Abstract: This article Presents a principal-agent model in which asymmetric information leads to contractual incompleteness. I show that in the presence of transactions costs, incompleteness may act as a signal of the principal's type. Two types of transactions costs are considered: those incurred ex ante (drafting costs) and those incurred ex post (enforcement or verification costs). I prove that in the presence of either of these costs, asymmetric information leads to more contractual incompleteness than full information does.
Published Version: doi:10.2307/2555872
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