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Costly Coasian Contracts

  • Luca Anderlini
  • Leonardo Felli

We identify and investigate the basic 'hold-up problem' which arises whenever each party to a contract has to pay some ex-ante cost for the contract to become feasible. We 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.

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File URL: http://sticerd.lse.ac.uk/dps/te/te362.pdf
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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 362.

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Date of creation: Oct 1998
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Handle: RePEc:cep:stitep:362
Contact details of provider: Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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