Differential awareness, ambiguity, and incomplete contracts: a model of contractual disputes?

Simon Grant, Jeff Kline and John Quiggin

No 151200, Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics

Abstract: We focus on aspects of differential awareness that give rise to contractual disputes. Parties to a contract are boundedly rational as the state space available to them is coarser than the complete state space. Hence, they may disagree as to which state of the world has occurred, and therefore as to what actions are required by the contract. Such disagreement leads to disputes. We show that the agents may prefer simpler less ambiguous contracts when facing potential disputes.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 23
Date: 2012-02-23
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Citations: View citations in EconPapers (4)

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Journal Article: Differential awareness, ambiguity, and incomplete contracts: A model of contractual disputes (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uqsers:151200

DOI: 10.22004/ag.econ.151200

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