Fix the Price or Price the Fix? Resolving the Sequencing Puzzle in Corporate Acquisitions

Significant corporate transactions are typically negotiated in stages: core pricing terms are fixed early, with most non-price provisions negotiated later. This contrasts with standard contract theory, where non-price terms are structured first and prices are chosen to fine-tune parties' net payoffs. We reconcile this disconnect by marrying a bargaining model with a search game over innovative contractual provisions, showing that sticky prices set up-front can optimally incentivize strategic search investments. We validate our predictions through a natural language processing analysis of M&A transactions and show that a legal shock in Delaware that strengthened price-first contracting norms led to greater contractual innovation.