Default rules and equilibrium selection of contract terms

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The paper analyses the effect of default rules on the selection of contract terms given asymmetric information. It is shown that even when costs of contracting around the default are zero, the form of the default rule may matter because it may serve as a means for selection between multiple equilibria. The result is illustrated in a simple signalling game.
Original languageEnglish
Pages (from-to)233-245
Number of pages13
JournalInternational Review of Law and Economics
Issue number2
Publication statusPublished - Jun 1996

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