Cont ract ing over Time when Writ ing is Cost ly ¤ Pierpaolo Bat tigalli Bocconi Uni ver sit y pi erpaol o.bat t i gal li@uni-bocconi.i t Gi ovanni Maggi Princeton University maggi@pri ncet on.edu January 2001 A bst ract In t his paper we examine a model of cont ract ing where part ies interact repeatedly and can cont ract at any point in t ime, but writ ing enforceable cont ract s is cost ly. We argue t hat t he costs of writing cont ract s can provide a theoret ical explanat ion for t wo common observat ions: the fact t hat long-t erm cont ract s are oft en preferred t o spot cont ract s, and t he fact t hat relat ionships are oft en managed by a combination of formal (ext ernally enforced) and informal (self-enforcing) cont ract s. ¤ Giovanni Maggi thankst heDepartment of Economicsat NYU and the European University Inst itute(EUI), where he was visiting during part of this project. Pierpaolo Battigalli grat efully acknowledges …nancial support from the EUI. We thank K… r Eliaz, Bentley M cLeod, Avinash Dixit and the participants in various seminars for useful comments.