A Theory of Threshold Contracts

Reelection threshold contracts in politics

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for reelection. Read my lips would turn into read my contracts. Reelection thresholds can be offered by p...

The Theory of Contracts

It is a great honor to give the Nancy Schwartz lecture. When Ehud Kalai first asked me, I was of course extremely excited. Then I looked at the list of previous speakers and a sense of panic quickly developed. I was put in mind of something Groucho Marx almost said: " If any club that you want to join asks you to be a member, they must have made a mistake. " Mistake or not, here I am, and my to...

A Theory of Contracts with Limited

We present a Theory of Contracts under costly enforcement in the context of a dynamic relationship between an uninformed buyer and a seller who is privately informed on his persistent cost at the outset. Public enforcement relies on remedies for breach. Private enforcement comes from severing relationships. We first characterize aggregate enforcement constraints ensuring that trading partners d...

Contracts: Theory and Evidence

The information systems outsourcing market has seen rapid growth. Companies are increasingly choosing to outsource many of their information systems activities to services firms rather than sourcing them internally. This trend is inconsistent with the predictions of some of the published literature which point to the high costs of using an outside market. These articles, based on transaction co...

The Objective Theory of Contracts