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Which is more critical to effective external enforcement: breach or verifiability? Explain ? Which remedy is more likely to achieve efficiency: expectation damages or restitution damages? Explain ? The technologies of interaction for two different contractual relationships are given by matrices A and B.
Answer the following questions for both technology A and technology B.
(a) Suppose the players can obtain externally enforced transfers by writing a contract. Under the assumption that the court can verify exactly the outcome of production, what value can the players obtain and what contract is written? Describe both the externally and self-enforced components.
(b) Repeat part (a) under the assumption that the court can only verify whether (I, I) is played-that is, it cannot distinguish between (I, N), (N, I), and (N, N).
(c) Explain or calculate the outcome for the setting of court-imposed breach remedies. Separately study expectation, reliance, and restitution. Assume (0, 0) is the benchmark, nonrelationship payoff for reliance and restitution.