Lee, Jihong (2008) Unforeseen contingency and renegotiation with asymmetric information. Economic Journal 118 (528), pp. 678-694. ISSN 0013-0133.
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 Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 01 Feb 2011 09:16 |
| Last Modified: | 02 Aug 2023 16:51 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/1960 |
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