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Public goods and the hold-up problem under asymmetric information

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  • Schmitz, Patrick W

Abstract

An agent can make an observable but non-contractible investment. A principal then offers to collaborate with the agent to provide a public good. Private information of the agent about his valuation may either decrease or increase his investment incentives, depending on whether he learns his type before or after the investment stage.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9065.

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Date of creation: Jul 2012
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Handle: RePEc:cpr:ceprdp:9065

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Keywords: asymmetric information; incomplete contracts; investment incentives; public goods;

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References

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  1. Schmitz, Patrick W., 2005. "Information Gathering, Transaction Costs and the Property Rights Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5417, C.E.P.R. Discussion Papers.
  2. Goldlücke, Susanne & Schmitz, Patrick W., 2014. "Investments as signals of outside options," Journal of Economic Theory, Elsevier, vol. 150(C), pages 683-708.
  3. Gonzalez, Patrick, 2002. "Investment and Screening under Asymmetric Endogenous Information," Cahiers de recherche, GREEN 0201, GREEN.
  4. Besley, Timothy J. & Ghatak, Maitreesh, 2001. "Government versus Private Ownership of Public Goods," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2725, C.E.P.R. Discussion Papers.
  5. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  6. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
  7. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
  8. Marco Francesconi & Abhinay Muthoo, 2011. "Control Rights In Complex Partnerships," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 9(3), pages 551-589, 06.
  9. Schmitz, Patrick W., 2008. "Incomplete contracts, the hold-up problem, and asymmetric information," Economics Letters, Elsevier, vol. 99(1), pages 119-122, April.
  10. Gul, Faruk, 2001. "Unobservable Investment and the Hold-Up Problem," Econometrica, Econometric Society, Econometric Society, vol. 69(2), pages 343-76, March.
  11. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288817, October.
  12. Maija Halonen-Akatwijuka & Evagelos Pafilis, 2009. "Reputation and Ownership of Public Goods," The Centre for Market and Public Organisation 09/211, Department of Economics, University of Bristol, UK.
  13. Jean Tirole, 1985. "Procurement and Renegotiation," Working papers 362, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Ohlendorf, Susanne & Schmitz, Patrick, 2009. "Signaling an Outside Option," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 281, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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Cited by:
  1. Schmitz, Patrick W., 2013. "Incomplete contracts and optimal ownership of public goods," Economics Letters, Elsevier, vol. 118(1), pages 94-96.

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