The hold-up problem, innovations, and limited liability

Patrick Schmitz

MPRA Paper from University Library of Munich, Germany

Abstract: An inventor can invest research effort to come up with an innovation. Once an innovation is made, a contract is negotiated and unobservable effort must be exerted to develop a product. In the absence of liability constraints, the inventor's investment incentives are increasing in his bargaining power. Yet, given limited liability, overinvestments may occur and the inventor's investment incentives may be decreasing in his bargaining power.

Keywords: hold-up problem; incomplete contracts; research and development; limited liability (search for similar items in EconPapers)
JEL-codes: D86 L23 O31 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-cta, nep-ino, nep-knm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The hold-up problem, innovations, and limited liability (2012)
Working Paper: The hold-up problem, innovations, and limited liability (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43407

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