Contracts, Liability Restrictions and Costly Verification

Mechanism design with partial state verifiability

“…Failure of an individual to produce evidence known to be available in a certain state of the world then provides proof that this state of the world has not occurred. Important applications include analysis of provability (Lipman and Seppi, 1995) and court proceedings Watson, 2004a andSquintani, 2004). 3 Finally, misrepresenting the truth may require costly physical actions.…”