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Costly Coasian Contracts

Author

Listed:
  • Anderlini, L.
  • Felli, L.

Abstract

The authors identify and investigate the basic `hold-up' problem which arises whenever each party to a contingent contract has to pay some ex ante cost for the contract to become feasible. They then proceed to show that, under plausible circumstances, a contractual solution' to this hold-up problem is not available. This is because a contractual solution to the hold-up problem typically entails writing a `contract over a contract' which generates a fresh set of ex ante costs, and hence is associated with a new hold-up problem. The paper concludes by investigating two applications of the results to a static and to a dynamic principal-agent model.

Suggested Citation

  • Anderlini, L. & Felli, L., 1997. "Costly Coasian Contracts," Cambridge Working Papers in Economics 9704, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:9704
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    Cited by:

    1. Luca Anderlini & Leonardo Felli, 2006. "Transaction Costs and the Robustness of the Coase Theorem," Economic Journal, Royal Economic Society, vol. 116(508), pages 223-245, January.
    2. G. Schwartz, 2000. "Contract Incompleteness, Contractual Enforcement and Bureaucracies," Princeton Economic Theory Papers 00s16, Economics Department, Princeton University.
    3. Luca Anderlini & Leonardo Felli, 1999. "Incomplete Contracts and Complexity Costs," Theory and Decision, Springer, vol. 46(1), pages 23-50, February.
    4. Rey, Patrick & Tirole, Jean, 2001. "Alignement of Interests and the Governance of Joint Ventures," IDEI Working Papers 441, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Anderlini, Luca & Felli, Leonardo, 2001. "Costly Bargaining and Renegotiation," Econometrica, Econometric Society, vol. 69(2), pages 377-411, March.
    6. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    7. Luca Anderlini & Leonardo Felli, "undated". "Costly Coasian Contracts," Penn CARESS Working Papers c5b2efc4326ca8bb8162440d6, Penn Economics Department.

    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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