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    Unforeseen contingency and renegotiation with asymmetric information

    Lee, Jihong (2008) Unforeseen contingency and renegotiation with asymmetric information. Economic Journal 118 (528), pp. 678-694. ISSN 0013-0133.

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    Abstract

    This article considers a buyer–seller contracting model in which the seller possesses private information about all relevant aspects of the state of nature, including how much each action is worth to the buyer. I argue that, given asymmetric information, the buyer may not entirely dismiss an unforeseen contingency claim by the seller. Then, if the buyer lacks the foresight/awareness to ‘expect the unexpected’, the model admits an equilibrium in which a seemingly complete contract is written and then renegotiated along its outcome path to generate inefficiency ex post.

    Metadata

    Item Type: Article
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 01 Feb 2011 09:16
    Last Modified: 11 Oct 2016 11:59
    URI: http://eprints.bbk.ac.uk/id/eprint/1960

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