Costly Coasian Contracts

Luca Anderlini and Leonardo Felli

Game Theory and Information from University Library of Munich, Germany

Abstract: We identify and investigate the basic `hold-up' problem which arises whenever each party to a contingent contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a `contractual solution' to this hold-up problem is not available. This is because a contractual solution to the hold-up problem typically entails writing a `contract over a contract' which generates a fresh set of ex-ante costs, and hence is associated with a new hold-up problem. We conclude the paper investigating two applications of our results to a static and to a dynamic principal-agent model.

Keywords: Hold-Up Problem; Ex-Ante Contractual Costs; Contracts Over Contracts; Incomplete Contracts; Principal-Agent Problems (search for similar items in EconPapers)
JEL-codes: C70 D23 D60 D80 (search for similar items in EconPapers)
Pages: 61 pages
Date: 1996-10-11, Revised 1997-01-16
Note: Type of Document - LaTex; prepared on IBM PC - EmTex; to print on PostScript 600DPI; pages: 61 ; figures: included
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Related works:
Working Paper: Costly Coasian Contracts (1998)
Working Paper: Costly coasian contracts (1998)
Working Paper: Costly Coasian Contracts (1997)
Working Paper: Costly Coasian Contracts
Working Paper: Costly Coasian Contracts'
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