Incomplete contracts: Where do we stand?

The paper takes stock of the advances and directions for research on the in complete contracting front. It first illustrates some of the main ideas of the incomplete contract literature through an example. It then offers metho dological insights on the standard approach to modeling incomplete contract s; in particular it discusses a tension between two assumptions made in the literature, namely rationality and the existence of transaction costs. Las t, it argues that, contrary to what is commonly argued, the complete contra ct methodology need not be unable to account for standard institutions such as authority and ownership; and it concludes with a discussion of the rese arch agenda.