(Thursday, 24th May 2018)
Title : The interaction between implicit and explicit contracts
Organizational and institutional economics place great emphasis on the study of the determinants and implications of the contracts chosen to govern economic transaction between parties. This applies both to explicit contracts (those that are written down and, at least to some extent, enforceable in court) and to implicit contracts (those that are sustained through the trust established and supported through repeated contracting). In particular, the literature has explored whether implicit contracting serves as a substitute or a complement to explicit contracting—that is, whether this sort of “trust” obviates the need for explicit contracts or instead makes them more useful and desirable. I will review the theoretical and empirical literatures that have addressed this question to illuminate the rich interplay between these modes of contracting.