Breach Remedies Inducing Hybrid Investments

Daniel Göller () and Alexander Stremitzer ()

Working Papers from Yale University, Department of Economics

Abstract: We show that parties in bilateral trade can rely on the default common law breach remedy of 'expectation damages' to induce simultaneously first-best relationship-specific investments of both the selfish and the cooperative kind. This can be achieved by writing a contract that specifies a sufficiently high quality level. In contrast, the result by Che and Chung (1999) that 'reliance damages' induce the first best in a setting of purely cooperative investments, does not generalize to the hybrid case. We also show that if the quality specified in the contract is too low, 'expectation damages' do not necessarily induce the ex-post efficient trade decision in the presence of cooperative investments.

JEL-codes: C70 J41 K12 L22 (search for similar items in EconPapers)
Date: 2009-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://economics.yale.edu/sites/default/files/file ... rs/wp000/ddp0072.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://economics.yale.edu/sites/default/files/files/Working-Papers/wp000/ddp0072.pdf [301 Moved Permanently]--> https://economics.yale.edu/sites/default/files/files/Working-Papers/wp000/ddp0072.pdf)

Related works:
Journal Article: Breach remedies inducing hybrid investments (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:yaleco:72

Access Statistics for this paper

More papers in Working Papers from Yale University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().