- European Research Project
- October 1, 2020 - December 31, 2022
This project aims to provide the first analysis of relational contracting when the parties do not initially) have precise information about the various courses of actions, and experiment them through the relationship. Examples include innovative activeties such as book publishing, research and development, technology adoption in developing countries, and drafting rules and laws in bureaucratic setting.
We introduce in relational contracts framework imprecision about the prospects of actions. Imprecision is formulated as ‘ambiguity’ by building on recent developments in decision theoretic literature. The aim in this project is to explore how the interaction of imprecise perceptions about the consequences of actions and moral hazard introduce new conceptual and analytical issues and how such an interaction plays a role in shaping dynamic relational incentives.
An understanding of these questions is relevant not only for motivating research and development, but also for diverse applications including technology adoption in developing countries, book publishing, as well as drafting new policies and rules of law. In publishing an author will typically have some imprecise information about the new project as previous experience is only partly relevant for new venture, and possibly better information in writing the book than the publisher. Technology adoption in developing countries is similarly dynamic process of experimentation and learning via relationship. Local entrepreneurs have better yet imprecise ideas about new technologies and new practices than development agencies. In policy making and drafting new rules of laws, uncertainty about various acts can shape the optimal degree of delegation implied by the moral hazard between politicians and between bureaucrats so that evidence-based policy-making can be achieved in a healthy democracy.
- relational contracts; ambiguity; experimentation; learning