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Incomplete Contracts, the Hold-Up Problem and Asymmetric Information

  • Schmitz, Patrick W

Given symmetric information, in a standard hold-up problem a buyer's investment incentives are always increasing in his bargaining power. While this result is robust under one-sided private information, it can be overturned under two-sided private information.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6322.

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Date of creation: Jun 2007
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Handle: RePEc:cpr:ceprdp:6322
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  1. Oliver Hart & John Moore, 2007. "Incomplete Contracts and Ownership: Some New thoughts," American Economic Review, American Economic Association, vol. 97(2), pages 182-186, May.
  2. Nöldeke, Georg & Schmidt, Klaus M., 1998. "Sequential investments and options to own," Munich Reprints in Economics 19327, University of Munich, Department of Economics.
  3. Ma, Ching-To Albert, 1994. "Renegotiation and Optimality in Agency Contracts," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 109-29, January.
  4. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  5. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
  6. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," NBER Working Papers 6726, National Bureau of Economic Research, Inc.
  7. Schmitz, Patrick W., 2002. "Simple contracts, renegotiation under asymmetric information, and the hold-up problem," European Economic Review, Elsevier, vol. 46(1), pages 169-188, January.
  8. Maskin, Eric & Moore, John, 1999. "Implementation and Renegotiation," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 39-56, January.
  9. Schmitz, Patrick W., 2002. "On the Interplay of Hidden Action and Hidden Information in Simple Bilateral Trading Problems," MPRA Paper 12531, University Library of Munich, Germany.
  10. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
  11. Schmitz, Patrick W., 2001. "The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," MPRA Paper 12562, University Library of Munich, Germany.
  12. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
  13. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  14. Ariel Rubinstein & Asher Wolinsky, 1989. "Renegotiation-Proof Implementation and Time Preferences," Discussion Papers 850, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. De Fraja, Gianni, 1999. "After You Sir. Hold-Up, Direct Externalities, and Sequential Investment," Games and Economic Behavior, Elsevier, vol. 26(1), pages 22-39, January.
  16. Rogerson, William P, 1992. "Contractual Solutions to the Hold-Up Problem," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 777-93, October.
  17. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
  18. Schmitz, Patrick W., 2002. "On simple contracts, renegotiation under asymmetric information, and the hold-up problem," MPRA Paper 12530, University Library of Munich, Germany.
  19. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
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