An Elementary Approach to the Hold-Up Problem with Renegotiation
So far, the existing literature on the hold-up problem with renegotiation has imposed assumptions such that the post-renegotiation payoffs are absolutely continuous functions. Since payoffs may fail to be differentiable at the investment profile to be sustained, first order conditions for incentives to invest must be handled with care. To avoid these difficulties, the present paper propagates a more elementary approach. A general condition is provided which necessarily must hold for an investment profile to be sustainable by a message contingent contract. If only one of the parties invests or, more generally, if investments can be aggregated into one dimension then the paper introduces assumptions leading to conditions which are necessary and sufficient for an investment profile to be sustainable.
|Date of creation:||Nov 2000|
|Date of revision:|
|Contact details of provider:|| Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany|
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse15_2000. 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: (BGSE Office)
If references are entirely missing, you can add them using this form.