Option Contracts and Renegotiation in Complex Environments
Thomas Lyon () and
Eric Rasmusen ()
No CIRJE-F-118, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo
Abstract:
Hart & Moore (1999) construct a model to show that contracts perform poorly in complex environments when the state of the world is unverifiable and renegotiation cannot be ruled out. They implicitly assume one player can extort payment from another by threatening to take an inefficient action which hurts both of them. We show that without this assumption a simple "buyer option" contract can implement the first-best even as complexity becomes severe.
Pages: 28 pages
Date: 2001-06
New Economics Papers: this item is included in nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2001/2001cf118.pdf (application/pdf)
Related works:
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:tky:fseres:2001cf118
Access Statistics for this paper
More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().