Title: Incompleteness as a Constraint in Contract Design

Authors: Stefan Krasa and Steven R. Williams

Abstract:

We develop a model that encompasses both the incomplete contracts that are
used in practice and the idealized complete contracts that address all
contingencies. The objectives of the paper are (i) to examine the extent of
the inefficiency caused by the constraint of contractual incompleteness, and
(ii) to identify properties of agents' preferences that determine whether or
not incompleteness causes inefficiency.