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Renegotiation Design and Contract Solutions to the Hold‐Up Problem

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  • M'hand Fares

Abstract

This paper surveys the literature on contractual solutions to the hold‐up problem which has addressed the issue of how to design the optimal contractual arrangement to achieve efficient investments in the presence of contract incompleteness. Although scholars have argued that renegotiation design is a necessary condition to avoid the hold‐up problem, some recent papers have seriously questioned this condition. We mainly show that renegotiation design remains a necessary condition to implement efficient investments.

Suggested Citation

  • M'hand Fares, 2006. "Renegotiation Design and Contract Solutions to the Hold‐Up Problem," Journal of Economic Surveys, Wiley Blackwell, vol. 20(5), pages 731-756, December.
    • Handle: RePEc:bla:jecsur:v:20:y:2006:i:5:p:731-756
    DOI: 10.1111/j.1467-6419.2006.00266.x
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    References listed on IDEAS

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    Cited by:

    1. M’hand Fares, 2009. "Specific performance, separability condition and the hold-up problem," Post-Print hal-02655908, HAL.
    2. Valeria Gattai & Piergiovanna Natale, 2017. "A New Cinderella Story: Joint Ventures And The Property Rights Theory Of The Firm," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 281-302, February.
    3. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    4. Kyoungwon Rhee, 2007. "The Value of Contracting with the Sequential Investments: The Role of Outside Values," Korean Economic Review, Korean Economic Association, vol. 23, pages 89-110.
    5. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.
    6. Patrick W Schmitz, 2022. "How (Not) to Purchase Novel Goods and Services: Specific Performance Versus at-will Contracts," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2563-2577.
    7. M'hand Fares, 2009. "Specific Performance, Separability Condition and the Hold-Up Problem," Economics Bulletin, AccessEcon, vol. 29(3), pages 2055-2062.
    8. Antonio Estache & Liam Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
    9. repec:plo:pone00:0229910 is not listed on IDEAS

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