Strategic Contractual Inefficiency and the Optimal Choice of Legal Rules

Abstract

Two separate groups of academics have brought about a renaissance of sorts in the analysis of incomplete contracts. Law and economics scholars—writing in law reviews—have shown renewed interest in how efficiency-minded lawmakers should fill gaps in incomplete contracts. Yet even before this, a group of economists—writing in economics journals—began developing new theories of "incomplete contracting" that are still largely unincorporated in the legal literature. These two strands of analysis have remained largely independent, in part because they focus on two different forms of contractual incompleteness.