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Costly coasian contracts

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Author Info

  • Luca Anderlini
  • Leonardo Felli

Abstract

We identify and investigate the basic ‘hold-up problem’ which arises whenever each party to a 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.

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File URL: http://eprints.lse.ac.uk/3583/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3583.

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Length: 56 pages
Date of creation: Oct 1998
Date of revision:
Handle: RePEc:ehl:lserod:3583

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Related research

Keywords: Ex-ante contractual costs; hold-up problem; Coase theorem; contracts over contracts; incomplete contracts.;

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References

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  1. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
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  3. Luca Anderlini & Leonardo Felli, 1998. "Costly Coasian Contracts," STICERD - Theoretical Economics Paper Series 362, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
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Citations

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Cited by:
  1. Anderlini, Luca & Felli, Leonardo, 1998. "Incomplete Contracts and Complexity Costs," MPRA Paper 28483, University Library of Munich, Germany.
  2. Luca Anderlini & Leonardo Felli, 1996. "Costly Coasian Contracts," Game Theory and Information 9610006, EconWPA, revised 14 Oct 1996.
  3. Luca Anderlini & Leonardo Felli, 2003. "Transaction Costs and the Robustness of the Coase Theorem," Working Papers gueconwpa~03-03-27, Georgetown University, Department of Economics.
  4. Anderlini, Luca & Felli, Leonardo, 2001. "Costly Bargaining and Renegotiation," Econometrica, Econometric Society, vol. 69(2), pages 377-411, March.
  5. G. Schwartz, 2000. "Contract Incompleteness, Contractual Enforcement and Bureaucracies," Princeton Economic Theory Papers 00s16, Economics Department, Princeton University.
  6. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.

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