From Walrasian general equilibrium to incomplete contracts : making sense of institutions

Vahabi, Mehrdad (2008): From Walrasian general equilibrium to incomplete contracts : making sense of institutions. Published in: Economie et Institutions , Vol. Vol 1, No. No. 1 (2002): pp. 99-143.

Abstract

This article explores the specific contribution of recent literature on incomplete contracts in comparison with the acontractual Walrasian general equilibrium as well as the complete optimal contracts of the Agency theory regarding the institutional identity of agents. It underlines a tension between the theoretical justification of contractual incompleteness on the one hand, and rationality postulate, on the other hand. It concludes the relevance of bounded rationality assumption and temporary equilibrium framework to overcome some logical incoherences of present incomplete contracts literature. This brings closer two important branches of new institutional economics, namely the Transaction Costs Economics and the Property Rights approach.

• Item Type: MPRA Paper
• Language: English
• Keywords: Incomplete contracts; Judge bounded rationaly, Agent's bounded rationality, Asymmetric information, Walrasian general equilibrium
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights; D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law

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