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Incomplete contracts and competition: another look at fisher body/general motors?

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  • Antonio Nicita

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  • Simone Sepe

Abstract

In this paper we analyze the problem of the enforcement of incomplete contracts with endogenous outside options. Some of the equilibria we outline may reverse one of the main results presented in the standard literature. We then revisit the literature on the highly debated Fisher Body/General Motors merger and suggest an explanation based on GM’s need to control the Fisher brothers’ outside options. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Antonio Nicita & Simone Sepe, 2012. "Incomplete contracts and competition: another look at fisher body/general motors?," European Journal of Law and Economics, Springer, vol. 34(3), pages 495-514, December.
  • Handle: RePEc:kap:ejlwec:v:34:y:2012:i:3:p:495-514
    DOI: 10.1007/s10657-010-9166-y
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    References listed on IDEAS

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    5. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
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    8. Shingo Ishiguro, 2010. "Holdup, search, and inefficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 307-338, August.
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    More about this item

    Keywords

    Incomplete contracts; Hold-up problem; Transaction costs; Endogenous outside options; Cross competition; Vertical integration; D23; L12; L14; L21; L22; L42;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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