Question: 1. "Default rules save transaction costs in direct proportion to their efficiency." Explain this proposition.
2. Suppose that Wabash completes the house one month later than promised. Inclement weather, which was no one's fault, caused the tardiness. Explain how the court might compute efficient damages.
3. Doctors who form a partnership may say nothing in the partnership agreement concerning its future dissolution. The parties may deliberately avoid discussing dissolution for fear of breeding distrust. Provide some other examples of gaps left in contracts for strategic reasons.
4. What sorts of things can corporations give as hostages in long-run contractual relations? Does hostage giving in long-run relationships serve the same or a different function as consideration in a short-run contract?