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Abstract
Much real-world contracting involves finding new clauses to add to a basic agreement, clauses which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and whether to accept them. This suggests a reason why contracts are incomplete in the sense of lacking Pareto-improving clauses: contract-reading costs matter as much as contract-writing costs. Fine print that is cheap to write can be expensive to read carefully enough to understand the value to the reader, and especially to verify the absence of clauses artfully written to benefit the writer at the reader's expense. As a result, complicated clauses may be rejected outright even if they really do benefit both parties, and this will deter proposing such clauses in the first place.

In a mixed-strategy Nash equilibrium, changing one player's payoffs affects only the other player's equilibrium strategy mix. This `Payoff Irrelevance Proposition' (PIP) appears to undercut the main foundations of economic policy analysis since, allegedly, equilibrium behavior will not respond to changes in incentives. We show, in contrast, that: (1) When the policy-maker has the first move in a sequential-move game, the PIP does not hold. (2) Even in a simultaneous-move game, the PIP holds only when the policy space is discrete, and for sufficiently small payoff revisions. Thus, incentives do generally affect behavior in equilibrium.