TY  - JOUR
AU  - Hart,Oliver
AU  - Moore,John
TI  - Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10397
PY  - 2004
Y2  - March 2004
UR  - http://www.nber.org/papers/w10397
L1  - http://www.nber.org/papers/w10397.pdf
N1  - Author contact info:
Oliver D. Hart
Department of Economics
Littauer Center 220
Harvard University
Cambridge, MA 02138
Tel: 617/496-3461
Fax: 617-495-7730
E-Mail: ohart@harvard.edu

John Moore
William Robertson Building
Edinburgh
Scotland, EH8 9JY
U.K.
E-Mail: j.h.moore@ed.ac.uk
AB  - We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are ruled out'. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on the list are not  ruled in'. A  loose' contract (long list) maximizes flexibility but may interfere with ex ante investment incentives. When these incentives are important enough, the parties may write a  tight' contract (short list), even though this leads to ex post inefficiency.
ER  -