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"Costly Coasian Contracts''

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  • 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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Paper provided by University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences in its series CARESS Working Papres with number 97-11.

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Handle: RePEc:wop:pennca:97-11

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  1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  2. 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.
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  23. Dilip Abreu & David Pearce & Ennio Stacchetti, 1989. "Renegotiation and Symmetry in Repeated Games," STICERD - Theoretical Economics Paper Series 198, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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Citations

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Cited by:
  1. Luca Anderlini & Leonardo Felli, . ""Costly Coasian Contracts''," CARESS Working Papres 97-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  2. 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.
  3. Nabil Al-Najjar, Luca Anderlini & Leonardo Felli, 2003. "Transaction Costs and the Robustness of the Coase Theorem," Working Papers gueconwpa~03-03-28, Georgetown University, Department of Economics.
  4. Anderlini, L. & Felli, L., 1999. "Costly bargaining and renegotiation," Discussion Paper Series In Economics And Econometrics 9910, Economics Division, School of Social Sciences, University of Southampton.
  5. G. Schwartz, 2000. "Contract Incompleteness, Contractual Enforcement and Bureaucracies," Princeton Economic Theory Papers 00s16, Economics Department, Princeton University.
  6. Anderlini, Luca & Felli, Leonardo, 1998. "Incomplete Contracts and Complexity Costs," MPRA Paper 28483, University Library of Munich, Germany.

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