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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://eprints.lse.ac.uk/3583/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3583.

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Length: 56 pages
Date of creation: Oct 1998
Date of revision:
Handle: RePEc:ehl:lserod:3583
Contact details of provider: Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/

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  3. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Luca Anderlini & Leonardo Felli, . "Costly Coasian Contracts," Penn CARESS Working Papers c5b2efc4326ca8bb8162440d6, Penn Economics Department.
  5. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
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  23. Chung, Tai-Yeong, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 1031-42, October.
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