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Does Competition Solve the Hold-Up Problem?

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Author Info

  • Felli, L.
  • Roberts, K.

Abstract

In an environment in which both buyers and sellers can undertake match specific investments, the presence of market competition for matches may solve hold-up and coordination problems generated by the absence of complete contingent contracts. In particular, this paper shows that when marching is assortative and sellers' investment precede market competition the investments are constrained efficient.

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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2000-w11.

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Length: 54 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:nuf:econwp:2000-w11

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: COMPETITION ; MARKET STRUCTURE;

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References

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  12. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . ""Efficient Non-Contractible Investments''," CARESS Working Papres 98-13, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  13. Ramey Garey & Watson Joel, 2001. "Bilateral Trade and Opportunism in a Matching Market," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-35, November.
  14. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  15. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March.
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  18. Aaron S. Edlin and Chris Shannon., 1995. "Strict Monotonicity in Comparative Statics," Economics Working Papers 95-238, University of California at Berkeley.
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  26. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 2000. "Efficient Non-Contractible Investments in Large Economies," CARESS Working Papres eff-inv-large, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  27. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  28. Eeckhout, Jan, 1999. "Bilateral Search and Vertical Heterogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 869-87, November.
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  30. Makowski, Louis & Ostroy, Joseph M, 1995. "Appropriation and Efficiency: A Revision of the First Theorem of Welfare Economics," American Economic Review, American Economic Association, vol. 85(4), pages 808-27, September.
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  34. repec:att:wimass:9608 is not listed on IDEAS
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