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Randomization in coalition contracts

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  • Patrick Schmitz

Abstract

This article analyzes a much debated clause in the coalition contract between SPD and FDP in Rheinland-Pfalz. Two parties write a contract, based on which decisions under incomplete information have to be made at a later point in time. It is shown that a complex complete contract can achieve the first best outcome. However, a simple incomplete contract can implement the first best outcome only if use of seemingly inefficient randomization is made. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Patrick Schmitz, 1998. "Randomization in coalition contracts," Public Choice, Springer, vol. 94(3), pages 341-353, March.
    • Handle: RePEc:kap:pubcho:v:94:y:1998:i:3:p:341-353
    DOI: 10.1023/A:1004940703549
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    1. Schmitz, Patrick W., 2002. "Simple contracts, renegotiation under asymmetric information, and the hold-up problem," European Economic Review, Elsevier, vol. 46(1), pages 169-188, January.
    2. Schmitz, Patrick W., 2000. "Book Review of “On Voting: a public choice approach” (Tullock, 1998)," MPRA Paper 6972, University Library of Munich, Germany.
    3. Schmitz, Patrick W. & Sliwka, Dirk, 1998. "Die Bedeutung von privater Information für Vertragsbeziehungen zwischen Käufern und Verkäufern," MPRA Paper 6941, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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