- Contract Theory
The study of how individuals and businesses construct and develop legal agreements. Contract theory analyzes how parties to a contract make decisions under uncertain conditions, and when there is asymmetric information. It draws upon principles of financial and economic behavior, as principles and agents often have different incentives to perform or not perform actions.
Contract theory is closely related to game theory, which looks at the decision-making process followed by individuals and businesses. Contracts can be incentivized in order to promote certain outcomes, but can also contain a level of moral hazard stemming from the distance between the principle and agent.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Contract theory — This article is about the economic analysis of contracts. For legal definitions and contract law, see Contract. For a less technical discussion of this topic, see Principal agent problem. In economics, contract theory studies how economic actors… … Wikipedia
contract theory — ˈ ̷ ̷ˌ ̷ ̷ noun : a theory or the group of theories holding that society originated in a contract compare social contract … Useful english dictionary
Efficient contract theory — suggests that in a perfectly competitive market, if a contract exists, then it must be efficient due to the survivorship principle. For example, the Initial Public Offering market in the US has an underwriting spread of approximately 7% in the… … Wikipedia
most significant contract theory — A recently formulated principle of conflict of laws, that in determining the law applicable to the execution, interpretation, validity, and performance of a contract, the court shall look to the law of the place which has the most significant… … Ballentine's law dictionary
Contract awarding — is the method used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract.  Usually at this stage the eligibility of the proposals has been concluded. So it remains to choose the… … Wikipedia
theory — I noun assumption, belief, conjecture, doctrina, doctrine, dogma, guesswork, hypothesis, ideology, opinion, philosophy, postulate, presupposition, proposition, ratio, speculation, supposition, surmise, thesis, thought, untested opinion, view… … Law dictionary
Contract — law … Wikipedia
Contract (disambiguation) — A contract is a promise or an agreement made of a set of promises, the breach of which is recognized by the law and for which legal remedies can be provided Contract may also refer to: Contents 1 Academics and education 2 Business 3 Computers and … Wikipedia
Contract farming — is agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide established… … Wikipedia
CONTRACT — (Heb. חוֹזֶה, ḥozeh), in general law theory a legally binding agreement between two or more parties, in terms of which one party undertakes for the benefit of the other to perform or refrain from a certain act. As such, contract is the main… … Encyclopedia of Judaism