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9-25-09 - Economics 448 Class Notes Oliver Williamson 1...

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Economics 448 – Class Notes – 9/25/09 Oliver Williamson 1. Search costs 2. Bargaining costs 3. Enforcement costs Bounded rationality Absent Present Opportunism Absent Bliss (no problems contracting) General Clause contracting Present Comprehensive contracting Problem! Ian McNeil (just a guy mentioned in the reading for Williamson): Types of contracting 1. Classical contracting 2. Neoclassical contracting 3. Relational contracting a. No formal contract per se. b. Both parties operate with long-term relationship in mind Classical contracting - Simpler times, less complicated world--> when we could understand our contracting partners better. 1. These agreements are carefully delimited - we know exactly the extent of the agreement. 2. The consequences for non-performance are clear. 3. There is complete presentation. that is, everything that happens in the future is brought to the present and is written into the contract. Classical contracting is more like comprehensive contracting : 1. Carefully delimited contracting – I know exactly where our relationship is going in the future 2. Consequences for non-performance 3. Complete presentation General contractors, electricians, plumbers are NOT in the category of classical contracting
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Neoclassical contracting – A.K.A Trilateral contracting because the third party arbitrator is involved: 1. Lots of gaps and contingencies in the contract - Cannot see the future all that well, so we have to have a contract full of gaps 2. Appropriate action might not be known until some contingencies (dependent actions) happen
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