Timing Problems in Contract Breach Decisions1

@article{Triantis1998TimingPI,
  title={Timing Problems in Contract Breach Decisions1},
  author={Alexander J. Triantis and George G. Triantis},
  journal={The Journal of Law and Economics},
  year={1998},
  volume={41},
  pages={163 - 208}
}
In contracts susceptible to efficient breach, each party has an American option to breach and pay damages rather than perform. She will repudiate early if the expected decrease in damages liability resulting from her partner's mitigation exceeds the expected value of the terminated contract, including the option to breach in the future. We show that each party has the incentive to repudiate earlier than socially optimal because expectation damages compensate the nonrepudiating party only for… Expand
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