||An Incomplete Contract Approach to the Eurozone Fiscal Governance over France
Tsuranuki, YoshihiroSuzuki, Yutaka
45 , 2017-03-20 , 法政大学経済学部学会
This is a conceptual application of incomplete contract theory to the eurozone fiscal governance game between the European Commission and France over the latter’s budget deficit reduction. Yutaka Suzuki’s model of renegotiation in incomplete contract games is applied. A car-part supplier and a car-assembler are engaged in renegotiation over a car part’s quality and setting a new price for it if its quality fails to meet the level promised in an initial contact. The model focuses on the incentive incorporated in a fixed price in incomplete contracting and makes it possible to illuminate the critical factors, a combination of the lack of flexile sanctioning and sufficient incentive, in analyzing how the European Commision has failed to enforce the EU fiscal rules.