A BEJTE Topics article.

Abstract

This paper explores how the costs of disclosing evidence affect the attainment of desirable outcomes in contractual relationships with complete information. Not only does evidence production cost influence the players' incentives to disclose evidence, it also affects their willingness to participate in a contractual relationship in which they may have to disclose evidence to convey information to a court about the state of the relationship. In some situations, evidence costs can interfere with the attainment of efficient outcomes, but in other situations evidence costs can help with attainment of efficient outcomes. A two-player production game in which investment influences the value of production and the players contract so as to shape investment incentives is used to illustrate these situations.

Submitted: September 26, 2006 · Accepted: April 23, 2008 · Published: July 20, 2008

Recommended Citation

Bull, Jesse (2008) "Costly Evidence Production and the Limits of Verifiability," The B.E. Journal of Theoretical Economics: Vol. 8 : Iss. 1 (Topics), Article 18.
Available at: http://www.bepress.com/bejte/vol8/iss1/art18