Economic Theory of Contract

The Economic Theory of Contract analyzes how people and organizations create agreements to exchange goods and services, focusing on incentives and outcomes. It examines how contracts can help reduce uncertainty and promote cooperation by outlining each party's rights and responsibilities. This theory highlights the importance of ensuring contracts align with the interests of all parties involved, helping to minimize costs and risks associated with breaches. By understanding these dynamics, individuals and businesses can make better decisions and foster trust in their transactions.