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Why Do We Know What We Know? Reevaluating The Economic Case Against Pre-Contractual Disclosure Duties And For Break-Up Fees, Barak Medina, Ofer Grosskopf
Why Do We Know What We Know? Reevaluating The Economic Case Against Pre-Contractual Disclosure Duties And For Break-Up Fees, Barak Medina, Ofer Grosskopf
ExpressO
The economic analysis of contract law offers influential arguments against pre-contractual disclosure duties and for break-up fees, based on the presumption that pre-contractual duties are (or should be) set to provide sufficient incentives to optimally invest in acquiring information at the negotiation stage. We suggest, however, that the existing analysis is flawed, since it overlooks an important incentive for investing in information gathering.
According to the conventional wisdom, a negotiating party will be motivated to invest resources in information gathering only on the basis of its expectation to extract the contractual surplus that the investment may generate. As a result, …