Specific Investment, Absence of Commitment and Observability
AbstractI consider the problem of the design of an optimal self-selection contract scheme for a principal who is buying a good from an agent which has the opportunity of making a cost-reducing unobservable investment prior to the contracting stage. Because of a hold-up problem, the agent will randomizes on his investment level. This forces the principal to spend informational "rents" to achieve screening. In equilibrium, these "rents" match the investment costs and the resulting contract yields a price schedule such that the marginal revenue of the agent equals his long run marginal cost curve. Since the agent's "type" is an endogenously determined characteristic, I argue that informational "rents" should be interpreted as quasi-rents that stand as a payment factor for investment.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Laval - Recherche en Energie in its series Papers with number 99-03.
Length: 31 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: UNIVERSITE LAVAL, GREEN, DEPARTEMENT D'ECONOMIQUE, QUEBEC G1K 7P4.
Phone: (418) 656-2096
Fax: (418) 656-7412
Web page: http://www.green.ecn.ulaval.ca/
More information through EDIRC
INVESTMENTS ; CONTRACTS;
Other versions of this item:
- Gonz�lez, Patrick, 1999. "Specific Investment, Absence of Commitment and Observability," Cahiers de recherche 9902, Université Laval - Département d'économique.
- Patrick González, 1999. "Specific Investment, Absence of Commitment and Observability," CIRANO Working Papers 99s-06, CIRANO.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
- Fudenberg, Drew & Tirole, Jean, 1990.
"Moral Hazard and Renegotiation in Agency Contracts,"
Econometric Society, vol. 58(6), pages 1279-1319, November.
- Drew Fudenberg & Jean Tirole, 1988. "Moral Hazard and Renegotiation in Agency Contracts," Working papers 494, Massachusetts Institute of Technology (MIT), Department of Economics.
- Tirole, Jean, 1986.
"Procurement and Renegotiation,"
Journal of Political Economy,
University of Chicago Press, vol. 94(2), pages 235-59, April.
- Thomas, Jonathan & Worrall, Tim, 1990.
"Foreign direct investment and the risk of expropriation,"
Kiel Working Papers
411, Kiel Institute for the World Economy.
- Thomas, Jonathan & Worrall, Tim, 1994. "Foreign Direct Investment and the Risk of Expropriation," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 81-108, January.
- Thomas, J. & Worral, T., 1991. "Foreign Direcyt Investment and the Risk of Expropriation," Papers 9126, Tilburg - Center for Economic Research.
- Thomas, J. & Worrall, T., 1990. "Foreign Direct Investment And The Risk Of Expropriation," The Warwick Economics Research Paper Series (TWERPS) 342, University of Warwick, Department of Economics.
- Thomas, J. & Worrall, T., 1991. "Foreign direct investment and the risk of expropriation," Discussion Paper 1991-26, Tilburg University, Center for Economic Research.
- Choi, Yongjae & Esfahani, Hadi Salehi, 1998. "Direct foreign investment and expropriation incentives: A mitigating role for match-specific capital," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 47-59.
- Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
- Rogerson, William P, 1992. "Contractual Solutions to the Hold-Up Problem," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 777-93, October.
- AGRELL, Per & KASPERZEC, Roman, 2010. "Dynamic joint investments in supply chains under information asymmetry," CORE Discussion Papers 2010085, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.