Information Gathering and the Hold-Up Problem in a Complete Contracting Framework

Patrick Schmitz

No 6988, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In a complete contracting model, a risk-neutral seller exerts effort while producing a good. Effort is a hidden action and stochastically influences the risk-neutral buyer's valuation. Then the buyer can gather private information about his valuation. The ex ante optimal contract may encourage information gathering, even though it is commonly known that it is ex post efficient to trade regardless of the buyer's valuation (so that information gathering is a strategic, unproductive rent-seeking activity). Information gathering occurs even more often if it is a verifiable action.

Keywords: Complete contracting; Hold-up problem; Information gathering (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (3)

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Journal Article: Information gathering and the hold-up problem in a complete contracting framework (2008)
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