THE MYTH OF OPTIMAL EXPECTATION DAMAGES.

A much-debated question in contract law scholarship is what the optimal measure of damages ®r breach should be. The casebook answer-drawing, from the theory of ejjicient breach-is expectation damages. This standard answer, which was a major contribution of the law and economics field, has come underattackby theoreticians within that jield itself. Toshed anempirical perspective on the question, we look at data on the types of damages provisions parties contract for themselves in international debt contracts. Specifically, we examine issuer call provisions, which are economically equivalent to damages for prepayment, yet not viewed as legally problematic in the manner an actual liquidated provision might be. We, find little evidence of a preference for the expectations damages measure. [ABSTRACT FROM AUTHOR]