Buyer-Option Contracts Restored: Renegotiation, Inefficient Threats, and the Hold-Up Problem
Thomas Lyon () and
Eric Rasmusen ()
No 2004-10, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy
“Buyer option” contracts, in which the buyer selects the product variant to be traded and chooses whether to accept delivery, are often used to solve hold-up problems. We present a simple game that focusses sharply on subgames in which the buyer proposes inefficient actions in order to improve his bargaining position. We argue for one of several alternative ways to model this situation. We then apply that modeling choice to recent models of the foundations of incomplete contracts and show that a buyer option contract is sufficient to induce first-best outcomes.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed
Published in Journal of Law Economics and Organization, 2004
Downloads: (external link)
Journal Article: Buyer-Option Contracts Restored: Renegotiation, Inefficient Threats, and the Hold-Up Problem (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iuk:wpaper:2004-10
Access Statistics for this paper
More papers in Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy Contact information at EDIRC.
Bibliographic data for series maintained by Rick Harbaugh ().