Abstract
This Article approached the incomplete contracting problem from a new perspective, one that brought to the foreground potential self-control problems faced by contracting parties. The Article identified two sources of incomplete contracts due to self-control problems. First, this Article showed how the timeinconsistent preferences of transacting parties can lead the parties to repeatedly procrastinate adopting contractual provisions that they had a strict (long-term) preference to adopt. Second, the Article showed how the intertemporal nature of contracting can lead to a projection bias by transacting parties: when trying to predict how their preferences may evolve during the transaction, parties will tend project their current preference onto their future ones. This can lead to systematic mispredictions of the magnitude of future changes in preferences and lead transacting parties to underappreciate the need to adopt contractual provisions to regulate the actions of their future selves.
Recommended Citation
Utset, Manuel A.
(2003)
"A Theory of Self-Control Problems and Incomplete Contracting: The Case of Shareholder Contracts,"
Utah Law Review: Vol. 2003:
No.
4, Article 5.
Available at:
https://dc.law.utah.edu/ulr/vol2003/iss4/5