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Conflict And Cooperation In Long-Term Contracts, Robert E. Scott

Faculty Scholarship

This Article uses the techniques of modern decision analysis and game theory to analyze the decisionmaking strategies of parties to long-term commercial contracts. Most parties to long-term contracts initially allocate the risks of future contingencies and agree – either explicitly or implicitly – to adjust this initial risk-allocation scheme if unanticipated events occur. Once contract risks are initially distributed, however, each party's self-interest may compel them to evade their responsibility rather than adjust cooperatively as originally agreed. Visualizing the interactions between contracting parties as an iterated prisoner's dilemma, the Author attempts to clarify the dynamics of this adjustment process. Professor …