Majoritarian vs. Minoritarian Defaults (with Robert Gertner), 51 Stanford Law Review 1591 (1999)
Recent theoretical analysis of contract default rules has devoted significant attention to the use of penalty default rules as a way to induce a contractor to reveal private information. Penalty default rules demonstrate how efficient rules cannot be derived by simply asking what most parties would have contracted for had they written a complete contract. Such "majoritarian" default rules derive from an implicit assumption about the reason why a particular contract is incomplete. A fuller efficiency analysis tries to understand the reasons why contracts are incomplete and how different default rules affect the efficiency of the contracting process and the contracts themselves. Our goal here is to show how an understanding of the underlying causes of contractual incompleteness informs the optimal choice of default rules.
Date of Authorship for this Version
Ayres, Ian and Gertner, Robert, "Majoritarian vs. Minoritarian Defaults" (1999). Faculty Scholarship Series. Paper 1253.