Bargain and Contract Theory in Law and Economics

Abstract

Social Cost."'1 It is the purpose of this study to examine the definitions and premises underlying the concept of bargain, upon which theories of transaction costs such as Coase's are predicated. It also will be necessary to examine the concept of contract, the economic implications of which deserve more specific attention. It is hoped that this approach will frame the diverse literature in the field in a clearer perspective. Since so much of the current discussion has been provoked by the formulation that has come to be called the "Coase theorem," it will be desirable to use this specific formulation of the issues as a point of departure even though some of Coase's premises have not been conspicuous in subsequent literature purporting to be in the same tradition. In general terms, the Coase theorem states that individual bargaining will result in similar allocations of resources regardless of the presence or