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| Topic: |
Business
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| Number of pages / Number of words: |
13 / 3628 |
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For example, an authoritative and widely used treatise
on contract law by Edward A. Farnsworth has twenty index entries under the heading “Good
Faith and Fair Dealingâ€. The Uniform Commercial Code of the United States requires all
parties to a contract to act in “good faith,†defined to mean “the observance of reasonable
commercial standards of fair dealing...
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Yet “fair†is never precisely defined. The next section outlines a model of fairness developed
with Lorne Carmichael (Carmichael and MacLeod (2003)). Following the insights
of Williamson (1975) and Hart (1995), we suggest that one can develop a concept of fairness
based upon the idea that it is optimal to reward sunk investment, and hence “fair†bargains
should take this into account...
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General points of the essay
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