Contractual signaling, relationship-specific investment and exclusive agreements

Luis Vasconcelos ()

Games and Economic Behavior, 2014, vol. 87, issue C, 19-33

Abstract: I analyze a model of hold-up with asymmetric information at the contracting stage. The asymmetry of information concerns the value of trade with external parties. I show that contractual signaling and efficiency of investment can conflict if only quantity is contractible. This conflict generates inefficient equilibria in terms of investment. Contracting on exclusivity in addition to quantity resolves the conflict and consequently eliminates the inefficiency of investment.

Keywords: Relationship-specific investment; Asymmetric information; Exclusivity (search for similar items in EconPapers)
JEL-codes: D82 K21 L14 L40 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:87:y:2014:i:c:p:19-33

DOI: 10.1016/j.geb.2014.04.006

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