Incorporating unawareness into contract theory

B-Tier
Journal: Games and Economic Behavior
Year: 2012
Volume: 76
Issue: 1
Pages: 181-194

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Asymmetric awareness of the contracting parties regarding the uncertainty surrounding them is proposed as a reason for incompleteness in contractual forms. An insurance problem is studied between a risk neutral insurer, who has superior awareness regarding the nature of the uncertainty, and a risk averse insuree, who cannot foresee all the relevant contingencies. The insurer can mention in a contract some contingencies that the insuree was originally unaware of. It is shown that there are equilibria where the insurer strategically offers incomplete contracts. Competition among insurers who are symmetrically aware of the uncertainty promotes awareness of the insuree.

Technical Details

RePEc Handle
repec:eee:gamebe:v:76:y:2012:i:1:p:181-194
Journal Field
Theory
Author Count
1
Added to Database
2026-01-25