Externality can be defined as the influence of other people not involved in the contract on the contractor. Such a contract is an internal contract. The influence or control is realized through a contract reached by way of consensus. The aforementioned ″other people″ are not under the control of the internal contract, but have influence on the internal contractor, which must be realized by reaching the external contract with the internal contractor. The internal contract and external contract form a dual contract, which is universal. Under the condition of full withdrawal right, all contracts, including the internal and external contracts, are reached with the consensus of every participant through profit and cost calculation, including the contract reached by way of mutually agreed authorization for the purpose of reducing decision-making cost. The external contract, as the external selection factor, due to varied conditions, may protect the completion and stability of the internal contract or replace the participants of the internal contract, enabling them to withdraw from the internal contract and change it. Realization of such a withdrawal right, however, depends on whether the withdrawal effect is bigger than the withdrawal cost. Theories like public choice, cooperative gambling, bargaining and general equilibrium can also be used to explain the dual contract.
何晓星. 双重合约论----基于对外部性的新解释[J]. 浙江大学学报(人文社会科学版), 2011, 41(4): 153-165.
He Xiaoxing. The Theory of Dual Contract: On the Foundation of the New Explanation about Externality. , 2011, 41(4): 153-165.