Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
No 00-4:
Theoretical Isolation in Contract Theory: Suppressing Margins and Entrepreneurship
Kirsten Foss and Nicolai Foss
Abstract: We discuss contract theory from a combined Austrian/new
institutional view. In the latter view, the world is seen as shot through
with ignorance and transaction costs, but, as a tendency, entrepreneurial
activity responds to the problems caused by these. All modeling must
critically reflect this. This ontological commitment is contrasted to
various isolations characteristic of contract theory, specifically the
modeling strategy of introducing often ad hoc and unexplained constraints
that suppress margins and possibilities of entrepreneurial actions that
would be open to real-world decision-makers. We illustrate this by means
of, for example, the treatment of asymmetric information under complete
contracting and the notion of control rights under incomplete
contracting.
Keywords: Contract theory; new institutional economics; Austrian economics; entrepreneurship; (follow links to similar papers)
JEL-Codes: B41; C70; D23; (follow links to similar papers)
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Downloadable files:
8778690544.pdf 
Download Statistics
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
