Continuing Contracts

Research output: Contribution to journalArticle (Academic Journal)peer-review

Abstract

Parties often regulate their relationships through “continuing” contracts that are not fixed term but roll over: employment is a leading example. Our premise is that parties apply fairness when they revise a continuing contract and that prior terms, together with market information, will be a reference point. A continuing contract can reduce (re)negotiation costs relative to a short-term or long-term contract. However, fair bargaining makes adjusting to outside options difficult and may cause inefficient outcomes. An implicit promise of a long-term relationship, as in employment, can improve matters.
Original languageEnglish
Pages (from-to)284-313
Number of pages30
JournalJournal of Law, Economics, and Organization
Volume36
Issue number2
DOIs
Publication statusPublished - 29 Jan 2020

Structured keywords

  • ECON Microeconomic Theory

Keywords

  • short-term contracts
  • long-term contracts
  • continuing contracts
  • fair bargaining
  • employment
  • at-will

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