What problem preventing complete contracts refers to the limits on the capacity of individuals to process information,deal with complexity and pursue rational aims?
A)Agency costs
B)Bounded rationality
C)Performance measurement difficulties
D)Asymmetric information
E)Contract body of law

Question

Quizplus · Accepted Answer

Bounded rationality is the problem preventing complete contracts which refers to the limits on the capacity of individuals to process information, deal with complexity and pursue rational aims. It is the idea that individuals have cognitive limitations that prevent them from being fully rational decision-makers, and this can lead to incomplete contracts because parties are unable to fully anticipate all future contingencies or costs. Agency costs refer to the costs associated with the principal-agent relationship, performance measurement difficulties refer to the challenge of accurately measuring and incentivizing performance in contracts, asymmetric information refers to situations where one party has more information than the other, and contract body of law refers to the legal framework governing contract creation and enforcement.

What Problem Preventing Complete Contracts Refers to the Limits on the Capacity