Incomplete contracts are contracts that do not or cannot specify all possible future contingencies, obligations, and outcomes relevant to a transaction or relationship. This concept is central in economics, contract theory, and legal studies, particularly when examining real-world contractual arrangements where uncertainty, complexity, or bounded rationality prevents full specification. An incomplete contract is a legal or economic agreement that does not account for every possible scenario that may arise in the future, either because it is too costly, too complex, or impossible to do so. Incomplete contracts play a crucial role in shaping the structure and outcomes of Global Value Chains (GVCs), particularly in the context of developing countries, where institutions, enforcement mechanisms, and bargaining power often differ markedly from those in developed economies.
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