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Costly Evidence Production and the Limits of Verifiability

By Jesse Bull


This paper explores the limits of "verifiability" induced by the process of costly evidence production in contractual relationships of complete information. I study how the cost of providing evidence (disclosing documents) influences the set of enforceable contracts. I show that evidence cost can be both beneficial and detrimental with regard to enlarging the set of settlement outcomes that can be implemented. Further, I study how what can be considered verifiable is influenced by parties’ incentives to produce evidence and by the particular evidence cost structure. My analysis includes the opportunity for contracting parties to renegotiate (or settle) prior to the enforcement phase. I also study how the availability of redundant documents expands the set of enforceable contracts, and discuss the relevance of my findings to the design of legal institutions.contracts, verifiability

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