Buyer-Option Contracts Restored: Renegotiation, Inefficient Threats, and the Hold-Up Problem
"Buyer-option" contracts, in which the buyer selects the product variant to be traded and chooses whether to accept delivery, are often used to solve holdup problems. We present a simple game that focuses sharply on subgames in which the buyer proposes inefficient actions in order to improve his bargaining position. We argue for one of several alternative ways to model this situation. We then apply that modeling choice to recent models of the foundations of incomplete contracts and show that a buyer-option contract is sufficient to induce first-best outcomes. Copyright 2004, Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 20 (2004)
Issue (Month): 1 (April)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://jleo.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994.
"Renegotiation Design with Unverifiable Information,"
12375014, Harvard University Department of Economics.
- Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March.
- Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1994. "Renegotiation design with unverifiable information," ULB Institutional Repository 2013/9591, ULB -- Universite Libre de Bruxelles.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
- Georg Nöldeke & Klaus M. Schmidt, 1992.
"Option Contracts and Renegotiation - A Solution to the Hold-Up Problem,"
Discussion Paper Serie A
417, University of Bonn, Germany, revised Aug 1993.
- Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
- Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation: A solution to the Hold-Up Problem," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
- Edlin, Aaron S & Hermalin, Benjamin E, 2000. "Contract Renegotiation and Options in Agency Problems," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 395-423, October.
- Ilya Segal, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 57-82.
- Donald B. Hausch & Yeon-Koo Che, 1999.
"Cooperative Investments and the Value of Contracting,"
American Economic Review,
American Economic Association, vol. 89(1), pages 125-147, March.
- Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
- Eric Maskin, 2001.
"On Indescribable Contingencies and Incomplete Contracts,"
Economics Working Papers
0008, Institute for Advanced Study, School of Social Science.
- Maskin, Eric, 2002. "On indescribable contingencies and incomplete contracts," European Economic Review, Elsevier, vol. 46(4-5), pages 725-733, May.
- Lyon, Thomas P & Huang, Haizhou, 2002. "Legal Remedies for Breach of the Regulatory "Contract."," Journal of Regulatory Economics, Springer, vol. 22(2), pages 107-32, September.
- Joskow, P.L., 1989.
"The Performance Of Long Term Contracts: Further Evidence From Coal Market,"
517, Massachusetts Institute of Technology (MIT), Department of Economics.
- Paul L. Joskow, 1990. "The Performance of Long-Term Contracts: Further Evidence from Coal Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 251-274, Summer.
- Joel Watson, 2007.
"Contract, Mechanism Design, and Technological Detail,"
Econometric Society, vol. 75(1), pages 55-81, 01.
- Joel Watson, 2002. "Contract, Mechanism Design, and Technological Detail," Theory workshop papers 505798000000000006, UCLA Department of Economics.
- Watson, Joel, 2006. "Contract, Mechanism Design, and Technological Detail," University of California at San Diego, Economics Working Paper Series qt2m08n7cg, Department of Economics, UC San Diego.
- Watson, Joel, 2002. "Contract, Mechanism Design, and Technological Detail," University of California at San Diego, Economics Working Paper Series qt18x0r2nn, Department of Economics, UC San Diego.
- Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
- repec:cdl:ucsdec:142237 is not listed on IDEAS
- Ayres, Ian & Madison, Kristin, 2000. "Threatening inefficient performance," European Economic Review, Elsevier, vol. 44(4-6), pages 818-828, May.
When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:20:y:2004:i:1:p:148-169. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.