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The Impact of Incomplete Contracts on Economics

Philippe Aghion, Mathias Dewatripont, Patrick Legros, and Luigi Zingales

Abstract

The 1986 article by Grossman and Hart, “A Theory of Vertical and Lateral Integration,” has provided a framework for understanding how firm boundaries are defined and how they affect economic performance. The property rights approach has provided a formal way to introduce incomplete contracting ideas into economic modelling. This book collects papers and opinion pieces on the impact that this property right approach to the firm has had on the economics profession. It shows that the impact has been felt sometimes in significant ways in a variety of fields, ranging from the theory of the firm and ... More

Keywords: property rights, incomplete contracting, finance, industrial organization, international trade, political economy, behavioural economics

Bibliographic Information

Print publication date: 2016 Print ISBN-13: 9780199826223
Published to Oxford Scholarship Online: January 2016 DOI:10.1093/acprof:oso/9780199826223.001.0001

Authors

Affiliations are at time of print publication.

Philippe Aghion, editor
Robert C. Waggoner Professor of Economics, Harvard University

Mathias Dewatripont, editor
Director, Banque Nationale de Belgique

Patrick Legros, editor
Full Professor of Economics, Universiti Libre de Bruxelles (ECARES)

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Contents

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Front Matter

Title Pages

Foreword

Part 1 Perspectives on Grossman and Hart (1986)

1 Introductory Remarks on Grossman and Hart (1986)

John Moore

2 Grossman-Hart (1986) as a Theory of Markets

Bengt Holmström

3 Remarks on Incomplete Contracting

Jean Tirole

4 Property Rights and Transaction Costs Theories

Steve Tadelis

5 GH and Applied Theory

Thomas Hubbard

Part 2 Incomplete Contracts and Firm Boundaries

6 Incomplete Contracts and Firm Boundaries: New Directions

Wouter Dessein

7 Discussion of Wouter Dessein’s “Incomplete Contracts and Firm Boundaries: New Directions”

Francine Lafontaine

8 Comment on “Incomplete Contracts and Firm Boundaries: New Directions” by Wouter Dessein

Michael D. Whinston

Part 3 Incomplete Contracts and Internal Organization

9 Incomplete Contracts and the Internal Organization of Firms

Phillipe Aghion, Nicholas Bloom, and John Van Reenen

10 Comments on Aghion, Bloom, and Van Reenen, “Incomplete Contracts and the Internal Organization of Firms”

John Roberts

11 The Empirical Implications of the Grossman-Hart Model: Comments on “Incomplete Contracts and the Internal Organization of Firms” by P. Aghion, N. Bloom and J. Van Reenen

W. Bentley McLeod

Part 4 Incomplete Contracts and Corporate Finance

12 Corporate Finance, Incomplete Contracts, and Corporate Control

Patrick Bolton

13 Discussion of Patrick Bolton’s “Corporate Finance, Incomplete Contracts, and Corporate Control”

Efraim Benmelech

14 Why the Incomplete Contract Approach Is Important for Finance

Luigi Zingales

Part 5 Incomplete Contracts and Business Firms

15 Oliver Hart’s Contributions to the Understanding of Strategic Alliances and Technology Licensing

Josh Lerner

16 Incomplete Contracts and Venture Capital

Steve Kaplan

17 Incomplete Contracts and the Role of Small Firms

Jeremy C. Stein

Part 6 Incomplete Contracts and Industrial Organization

18 Contracts, Ownership, and Industrial Organization: Past and Future

Patrick Legros and Andrew F. Newman

19 Discussion of “Contracts, Ownership, and Industrial Organization: Past and Future,” by Patrick Legros and Andrew Newman

Mathias Dewatripont

20 Discussion of “Contracts, Ownership, and Industrial Organization: Past and Future,” by Patrick Legros and Andrew Newman

Kai-Uwe Kühn

Part 7 Incomplete Contracts and International Trade

21 Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production

Pol Antràs

22 Comment on Pol Antràs: “Grossman-Hart (1986) Goes Global: Incomplete Contracts, Property Rights, and the International Organization of Production”

Elhanan Helpman

23 The Theory of the Firm Goes Global

Dalia Marin

Part 8 Incomplete Contracts and Public Ownership

24 Incomplete Contracts and Not-for-Profit Firms

Paul A. Grout

25 Firm Ownership: The Legacy of Grossman and Hart

Henry Hansmann

26 Ex Ante Anonymity and Government Allocation of Property Rights

Rohan Pitchford

Part 9 Incomplete Contracts and Political Economy

27 Political Treaties as Incomplete Contracts

Bård Harstad

28 Incomplete Contracts and Political Economy

Gerard Roland

29 Incomplete Contracting and the Design of Constitutions

Guido Tabellini

Part 10 Incomplete Contracts, Mechanism Design, and Complexity

30 Comments on the Foundations of Incomplete Contracts

Eric Maskin

31 Comments on the Foundations of Incomplete Contracts

John Moore

32 Incomplete Contracts and Mechanism Design

Richard Holden

33 Complexity and Undescribability

Nabil I. Al-Najjar Luca Anderlini Leonardo Felli

Part 11 Incomplete Contracts, Reference Points, and Communication

34 New Directions of Incomplete Contracts: Reference Points, Communication, and Renegotiation

Christian Zehnder

35 Some Recent Experimental Evidence on Contracts as Reference Points

Klaus Schmidt

36 Incomplete Contracting in the Field

Antoinette Schoar

End Matter

Index