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Costly Coasian Contracts

Listed author(s):
  • 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://www.econ.upenn.edu/Centers/CARESS/
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Paper provided by Penn Economics Department in its series Penn CARESS Working Papers with number c5b2efc4326ca8bb8162440d62ce6510.

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Handle: RePEc:cla:penntw:c5b2efc4326ca8bb8162440d62ce6510
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  10. 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.
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  18. William P. Rogerson, 1992. "Contractual Solutions to the Hold-Up Problem," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 777-793.
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  23. Luca Anderlini & Leonardo Felli, 1996. "Costly Contingent Contracts," STICERD - Theoretical Economics Paper Series /1996/313, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  24. Abrea Dilip & Pearce David & Stacchetti Ennio, 1993. "Renegotiation and Symmetry in Repeated Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 217-240, August.
  25. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, December.
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