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Dynamic Contract Breach
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ISBN10: 1289060983
ISBN13: 9781289060985
Publisher: Bibliogov
Published: Jun 27 2013
Pages: 32
Weight: 0.17
Height: 0.07 Width: 7.44 Depth: 9.69
Language: English
ISBN13: 9781289060985
Publisher: Bibliogov
Published: Jun 27 2013
Pages: 32
Weight: 0.17
Height: 0.07 Width: 7.44 Depth: 9.69
Language: English
This paper studies the design of optimal, privately-stipulated damages when breach of contract is possible at more than one point in time. It offers an intuitive explanation for why cancellation fees for some services (e.g., hotel reservations) increase as the time for performance approaches. If the seller makes investments over time to improve her value from trade, she will protect the value of her investments by demanding a higher compensation when the buyer breaches their contract at a time closer to when contract performance is due.
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