TY  - JOUR
AU  - Carbonell-Nicolau,Oriol
AU  - Comin,Diego
TI  - Testing out Contractual Incompleteness: Evidence from Soccer
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11110
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11110
L1  - http://www.nber.org/papers/w11110.pdf
N1  - Author contact info:
Diego A. Comin
Harvard Business School
Soldiers Field
Boston, MA 02163
Tel: 617/495-5011
E-Mail: dcomin@hbs.edu
AB  - The theory of incomplete contracting is rival to that of complete contracting as a frame of reference to understand contractual relationships. Both approaches rest upon diametrically opposed postulates and lead to very different policy conclusions. From a theoretical viewpoint, scrutiny of the postulates has revealed that both frameworks are reasonable. 
This paper designs and implements an empirical test to discern whether contracts are complete or incomplete. We analyze a problem where the parties' inability to commit not to renegotiate inefficiencies is sufficient for contractual incompleteness. We study optimal contracts with and without commitment and derive an exclusion restriction that is useful to identify the relevant commitment scenario. The empirical analysis takes advantage of a data set from Spanish soccer player contracts. Our test rejects the commitment hypothesis, which entails the acceptance of the existence of contractual incompleteness in the data. We argue that our conclusions should hold a fortiori in many other economic environments.
ER  -