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.
• The most comprehensive and authoritative survey of economics of contracts available • Deals with one of most dynamic areas of economic research at frontiers of economics, law, management and public policy • Written by leading economists from North America and Europe
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.