Incomplete Contracts and Renegotiation

@article{Hart1988IncompleteCA,
  title={Incomplete Contracts and Renegotiation},
  author={Oliver Hart and John. Moore},
  journal={Econometrica},
  year={1988},
  volume={56},
  pages={755-785}
}
When drawing up a contract, it is often impracticable to specify all the relevant contingencies, and so contracts are typically incomplete. This paper considers the extent to which these gaps migh t be filled by building into the contract a mechanism for revising th e terms of trade. One conclusion is that because the par-ties can res cind the original contract and ne-gotiate a new one, severe limitatio ns are placed on the form the revisions can take. The authors charact erize the optimal… 
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