TY  - JOUR
AU  - Bebchuk,Lucian Arye
AU  - Shavell,Steven
TI  - Reconsidering Contractual Liability and the Incentive to Reveal Information
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7106
PY  - 1999
Y2  - May 1999
UR  - http://www.nber.org/papers/w7106
L1  - http://www.nber.org/papers/w7106.pdf
N1  - Author contact info:
Lucian A. Bebchuk
Harvard Law School
1545 Massachusetts Avenue
Cambridge, MA 02138
Tel: 617/495-3138
Fax: 617/812-0554
E-Mail: bebchuk@law.harvard.edu

Steven Shavell
Harvard Law School
1575 Massachusetts Avenue
Hauser Hall 508
Cambridge, MA  02138
Tel: 617/495-3668
Fax: 617/496-2256
E-Mail: shavell@law.harvard.edu
AB  - In an earlier work, we analyzed how the legal rules governing contractual liability affect the transfer of information between the parties to the contract.  In particular, we showed how limitations on contractual liability might lead high valuation buyers to reveal their valuation of performance, and we identified the circumstances under which such limitations on liability are and are not socially desirable.  In an article forthcoming in the Stanford Law Review, Barry Adler develops a critique of our analysis, as well as that of Ayres and Gertner, who independently argued that contractual rules can beneficially facilitate information transfers.  We reconsider here the subject of contractual liability and the revelation of information and respond to Adler's critique.  We find Adler's model to be a natural extension of ours rather than a departure from it.  Our reexamination leads to the conclusion that the informational effects that our work analyzed are important to take into account in designing contract rules.
ER  -