The Problem of Incomplete Contracts

Incompleteness of Employment Contracts

How Incomplete Contracts and External Effects Impede Pareto Efficiency

Incompleteness of Loan Contracts Due to Unenforceable Borrower Behavior

Freelance Web Design Agreement

A software company hires a programmer with a contract that specifies their salary, working hours, and a clause requiring them to 'write high-quality, efficient code.' After three months, the company is dissatisfied with the programmer's output, claiming it is not 'high-quality' enough. Based on the principles of contract design, why is this employment agreement considered an incomplete contract?

Loan Agreement Analysis

Match each contractual scenario with the primary reason it represents an incomplete contract.

The Practicality of Complete Contracts

A contract is considered 'complete' as long as it specifies all the tasks to be performed and the payment for those tasks, because these elements are observable by the parties involved.

A farm owner contracts a worker to manage an apple orchard. The contract specifies the worker's salary and the number of hours they must work per week. It also includes a clause requiring the worker to 'put forth a high degree of effort in tending to the trees.' Why does the clause regarding 'a high degree of effort' make this an incomplete contract?

Construction Subcontract Analysis

A restaurant owner hires an artist to paint a mural. The contract specifies the payment, the deadline, and the theme: 'a cheerful depiction of the local community.' Why is this agreement fundamentally an incomplete contract?

Venture Capital Investment Agreement