The Hold Up Problem And Incomplete Contracts
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Author | : Patrick W. Schmitz |
Publisher | : |
Total Pages | : 0 |
Release | : 2001 |
Genre | : |
ISBN | : |
Download The Hold-Up Problem and Incomplete Contracts Book in PDF, Epub and Kindle
Contract theory is one of the most active fields of research in contemporary microeconomics. One of the reasons why it has been particularly popular in recent years may be the fact that many economists think that the incomplete contracts approach as pioneered by Grossman and Hart (1986) and Hart and Moore (1990) can help to answer important questions regarding the boundaries of the firm, which have been raised by Coase (1937) and more recently by Williamson (1985). In the meantime, the incomplete contract paradigm has been fruitfully applied to many relevant economic topics which are no longer restricted to the theory of the firm. However, several economic theorists still feel uncomfortable about important issues surrounding the incomplete contracts approach. Such concerns have lead some researchers to a renewed interest in the more traditional theory of complete contracts, which is closely related to the theory of implementation or mechanism design. This article complements existing surveys on contract theory in two ways. First, the surveys that I am aware of are of a quite technical nature and therefore difficult to access for readers who are not already specialists in the field. In contrast, while trying to be as rigorous as necessary, this paper presents all ideas verbally without any mathematical pyrotechnics. Second, instead of attempting to be exhaustive and to provide final answers, this paper is focused on some specific topics which received particular attention by researchers in recent years and puts emphasis on open questions that should be addressed in future research.
Author | : Patrick Schmitz |
Publisher | : |
Total Pages | : 13 |
Release | : 2007 |
Genre | : Business intelligence |
ISBN | : |
Download Incomplete Contracts, the Hold-up Problem and Asymmetric Information Book in PDF, Epub and Kindle
Author | : Patrick Schmitz |
Publisher | : |
Total Pages | : 0 |
Release | : 2007 |
Genre | : Business intelligence |
ISBN | : |
Download Incomplete Contracts, the Hold-up Problem and Asymmetric Information Book in PDF, Epub and Kindle
Author | : Richard Holden |
Publisher | : Cambridge University Press |
Total Pages | : 94 |
Release | : 2021-11-18 |
Genre | : Political Science |
ISBN | : 100902017X |
Download Can Blockchain Solve the Hold-up Problem in Contracts? Book in PDF, Epub and Kindle
A vexing problem in contract law is modification. Two parties sign a contract but before they fully perform, they modify the contract. Should courts enforce the modified agreement? A private remedy is for the parties to write a contract that is robust to hold-up or that makes the facts relevant to modification verifiable. Provisions accomplishing these ends are renegotiation-design and revelation mechanisms. But implementing them requires commitment power. Conventional contract technologies to ensure commitment – liquidated damages – are disfavored by courts and themselves subject to renegotiation. Smart contracts written on blockchain ledgers offer a solution. We explain the basic economics and legal relevance of these technologies, and we argue that they can implement liquidated damages without courts. We address the hurdles courts may impose to use of smart contracts on blockchain and show that sophisticated parties' ex ante commitment to them may lead courts to allow their use as pre-commitment devices.
Author | : Andrea Moisello |
Publisher | : |
Total Pages | : 42 |
Release | : 2007 |
Genre | : |
ISBN | : |
Download Incomplete Contracts, Incentives and Hold-up Problem in Regulation Book in PDF, Epub and Kindle
Author | : Eva I. Hoppe |
Publisher | : |
Total Pages | : 32 |
Release | : 2009 |
Genre | : Incomplete contracts |
ISBN | : |
Download Can contracts solve the hold-up problem? : experimental evidence Book in PDF, Epub and Kindle
Author | : Eric Brousseau |
Publisher | : Cambridge University Press |
Total Pages | : 604 |
Release | : 2002-10-17 |
Genre | : Business & Economics |
ISBN | : 9780521893138 |
Download The Economics of Contracts Book in PDF, Epub and Kindle
A 2002 survey of economics of contracts appealing to scholars in economics, management and law.
Author | : Marco A. Castaneda |
Publisher | : |
Total Pages | : |
Release | : 2008 |
Genre | : |
ISBN | : |
Download The Hold-Up Problem in a Repeated Relationship Book in PDF, Epub and Kindle
Much of the literature on what determines the scope of operations of a producer has centered on the ``hold-up problemquot;. The standard results indicate the hold-up problem may lead to suboptimal investments, and therefore integration may improve the organization of production. In this paper, we consider a repeated relationship with durable investments and show the possibility of integration improves the choice of investments and there is no integration in equilibrium. The equilibrium contract is non-exclusive, in order to allow the buyer to choose integration in later periods. We derive this result in the presence of very simple and incomplete contracts.
Author | : Pol Antràs |
Publisher | : |
Total Pages | : 64 |
Release | : 2003 |
Genre | : Incomplete contracts |
ISBN | : |
Download Incomplete Contracts and the Product Cycle Book in PDF, Epub and Kindle
The incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders. In a dynamic, general-equilibrium Ricardian model of North-South trade, the incompleteness of international contracts is shown to lead to the emergence of product cycles. Because of contractual frictions, goods are initially manufactured in the North, where product development takes place. As the good matures and becomes more standardized, the manufacturing stage of production is shifted to the South to benefit from lower wages. Following the property-rights approach to the theory of the firm, the same force that creates product cycles, i.e., incomplete contracts, opens the door to a parallel analysis of the determinants of the mode of organization. The model gives rise to a new version of the product cycle in which manufacturing is shifted to the South first within firm boundaries, and only at a later stage to independent firms in the South. Relative to a world with only arm's length transacting, allowing for intrafirm production transfer by multinational firms is shown to accelerate the shift of production towards the South, while having an ambiguous effect on relative wages. The model delivers macroeconomic implications that complement the work of Krugman (1979), as well as microeconomic implications consistent with the findings of the empirical literature on the product cycle.
Author | : Dieter Balkenborg |
Publisher | : |
Total Pages | : 0 |
Release | : 2010 |
Genre | : |
ISBN | : |
Download A Simple Economic Teaching Experiment on the Hold-Up Problem Book in PDF, Epub and Kindle
The hold-up problem is central to the theory of incomplete contracts. It shows how the difficulty to write complete contracts and the resulting need to renegotiate can lead to underinvestment. We describe the design of a simple teaching experiment that illustrates the hold-up problem. The model used is a simple perfect information game. The experiment can hence also be used to illustrate the concept of subgame perfect equilibrium and the problem of making non-binding commitments.