Contract Renegotiation, Mechanism Design, and the Liquidated Damages Rule
نویسنده
چکیده
منابع مشابه
Investment and liquidation in renegotiation-proof contracts with moral hazard
In a long-term contract with moral hazard, the liquidation of the firm can arise as the outcome of the optimal contract. However, if the future production capability or market opportunities remain unchanged, liquidation may not be free from renegotiation. Will the firm ever be liquidated if we allow for renegotiation? This paper shows that the firm can still be liquidated even though liquidatio...
متن کاملAn Austrian Perspective on the Law of Liquidated Damages: the Case for an All-enforcement Rule
At common law, courts will not enforce liquidated damages clauses unless the stipulated sum bears a reasonable relation to either the anticipated or actual losses that result from breach. Penalty clauses, intended to compel performance, are per se unenforceable. Commentators have set forth arguments both for and against this common-law rule on the basis of efficiency. One of the main principles...
متن کاملImplications of Breach Remedy and Renegotiation Design for Innovation and Capacity
A writes supply contracts with N buyers. Then, the buyers invest in innovation, and the manufacturer builds capacity. Finally, demand is realized, and the firms renegotiate the supply contracts to achieve an efficient allocation of capacity among the buyers. The court remedy for breach of contract (specific performance versus expectation damages) affects how the firms share the gain from renego...
متن کاملRisk and Uncertainty Program TITLE: A matter of interpretation: ambiguous contracts and liquidated damages AUTHORS:
We focus on syntactic aspects of differential awareness that give rise to contractual disputes. Boundedly rational parties use a common language, but do not share a common understanding of the world, leading to ambiguity in both syntactic and semantic forms. In contractual relationships, ambiguity leads to disagreement and disputes. We show that the agents may prefer simpler less ambiguous cont...
متن کاملThe Option Element in Contracting
I. THE IMPORTANCE OF OPTION CONTRACTS ............................ 2191 A. Special Doctrinal Treatment of Option Contracts............ 2192 1. Consideration and Mutuality........................................ 2192 2. Offer and Acceptance.................................................... 2196 3. Performance, Breach, and Damages ........................... 2198 a. Anticipatory Repudiation ......
متن کامل