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Public goods and the hold-up problem under asymmetric information

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Listed author(s):
  • Schmitz, Patrick W.

Abstract

An agent can make an observable but non-contractible investment. A principal then offers to collaborate with the agent to provide a public good. Private information of the agent about his valuation may either decrease or increase his investment incentives, depending on whether he learns his type before or after the investment stage.

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File URL: http://www.sciencedirect.com/science/article/pii/S016517651200451X
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 3 ()
Pages: 642-645

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:642-645
DOI: 10.1016/j.econlet.2012.08.016
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

Keywords: Asymmetric information; Incomplete contracts; Investment incentives; Public goods;

Other versions of this item:

Find related papers by JEL classification:
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
  • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

References listed on IDEAS
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  1. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 115-138.
  2. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
  3. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1343-1372.
  4. Ohlendorf, Susanne & Schmitz, Patrick, 2009. "Signaling an Outside Option," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 281, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  5. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1127-1161.
  6. Gul, Faruk, 2001. "Unobservable Investment and the Hold-Up Problem," Econometrica, Econometric Society, vol. 69(2), pages 343-376, March.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, April.
  8. Maija Halonen-Akatwijuka & Evagelos Pafilis, 2009. "Reputation and Ownership of Public Goods," The Centre for Market and Public Organisation 09/211, Department of Economics, University of Bristol, UK.
  9. Schmitz, Patrick W., 2008. "Incomplete contracts, the hold-up problem, and asymmetric information," Economics Letters, Elsevier, vol. 99(1), pages 119-122, April.
  10. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
  11. repec:hrv:faseco:30727607 is not listed on IDEAS
  12. Marco Francesconi & Abhinay Muthoo, 2011. "Control Rights In Complex Partnerships," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 551-589, 06.
  13. Patrick Gonzàlez, 2004. "Investment and Screening Under Asymmetric Endogenous Information," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 502-519, Autumn.
  14. Tirole, Jean, 1986. "Procurement and Renegotiation," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 235-259, April.
  15. Goldlücke, Susanne & Schmitz, Patrick W., 2014. "Investments as signals of outside options," Journal of Economic Theory, Elsevier, vol. 150(C), pages 683-708.
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Cited by:

  1. Schmitz, Patrick W., 2013. "Incomplete contracts and optimal ownership of public goods," Economics Letters, Elsevier, vol. 118(1), pages 94-96.

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