We explore how the structure of incentives contracts adjusts to the creation of quasi-rents
by the delivery of certain types of contract obligations under weak third party
enforcement (TPE). The situation invites quasi-rent appropriation by some contractor.
We focus on possible ex-post opportunism by the principal. We propose the concept of
globally incentives compatible (GIC) contracts, where no contractor has the incentive to
deviate ex-post from the obligations set ex-ante in the contract. We model optimal
appropriation by the principal and the response of the agent when the contract is not GIC.
The conditions that guarantee GIC for principal-agent the incentives contracts under
weak TPE are investigated.
