Economics of Contracts

Economics of contracts explores how parties create agreements to efficiently allocate resources, manage risks, and ensure mutually beneficial outcomes. It examines how contract design influences incentives, accountability, and cooperation, helping prevent misunderstandings and opportunistic behavior. By analyzing costs of drafting and enforcing contracts versus the benefits of clear, enforceable arrangements, it guides how companies and individuals structure agreements to maximize value and reduce potential conflicts. Ultimately, it seeks to promote efficient, fair exchanges that align incentives and foster long-term relationships.