Economics Game Theory Questions
In game theory, complete contracts refer to agreements that specify all possible contingencies and outcomes, leaving no room for ambiguity or uncertainty. These contracts outline the actions to be taken by each party under every possible circumstance, ensuring that all parties have a clear understanding of their rights and obligations.
On the other hand, incomplete contracts are agreements that do not cover all possible contingencies or outcomes. They leave certain aspects of the agreement unspecified or open to interpretation. This allows for flexibility and adaptation to changing circumstances but also introduces potential conflicts and uncertainties between the parties involved.
In summary, the main difference between complete and incomplete contracts in game theory lies in the level of detail and specificity they provide. Complete contracts leave no room for ambiguity, while incomplete contracts allow for flexibility but may lead to conflicts and uncertainties.