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Yasunori Watanabe
''A monotone comparative static result on contract incompleteness''
( 2008, Vol. 4 No.16 )
The purpose of this paper is to generalize the incomplete contract model of Bajari and Tadelis (2001) into a continuous model, and to derive the condition under which the monotone comparative statics (MCS) methods can be applied. I will show that a type of single-crossing condition on the isoprobability curves of uncertainty is necessary and sucient for the availability of the MCS methods when a player has a supermodular ex post utility function. In this case, the greater the magnitude of uncertainty, the less his optimal contract allows the project to proceed smoothly.
JEL: D8 - Information, Knowledge, and Uncertainty: General
C6 - Mathematical Methods and Programming: General
Manuscript Received : Jun 04 2008 Manuscript Accepted : Jun 12 2008

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