A model of Cooperative Investments with Three Players
We consider a model with three players in which one of them has the possibility to make a relationship-specific investment which produces an innovation. The innovation affects only the payoff of the other two players - hence, a cooperative innovation. We show that, in some cases, the presence of a third player reduces the hold-up problem, but when the competition becomes too fierce it may lead to overinvestment. In contrast to the prevailing literature on contract theory, we show that, even with a cooperative innovation, the possibility to sign a simple (incomplete) contract can still influence the ex-ante incentive to invest. The model is then applied to investigate the separation of regulatory powers where a monopolistic firm can be regulated either by one or two regulators.
|Date of creation:||Feb 2008|
|Contact details of provider:|| Postal: Piazzale Martelli, 8, 60121 Ancona|
Phone: +39 071 220 7100
Fax: +39 071 220 7102
Web page: http://www.dises.univpm.it/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:anc:wpaper:312. 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: (Maurizio Mariotti)
If references are entirely missing, you can add them using this form.