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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.
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Web page: http://www.lse.ac.uk/

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  1. Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
  2. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
  3. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  4. Luca Anderlini & Leonardo Felli, . "Costly Coasian Contracts," Penn CARESS Working Papers c5b2efc4326ca8bb8162440d6, Penn Economics Department.
  5. Barton L. Lipman, 1992. "Limited Rationality and Endogenously Incomplete Contracts," Working Papers 858, Queen's University, Department of Economics.
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  9. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  10. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1994. "Renegotiation design with unverifiable information," ULB Institutional Repository 2013/9591, ULB -- Universite Libre de Bruxelles.
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  12. Eric Maskin & Jean Tirole, 1997. "Unforseen Contingencies, Property Rights, and Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1796, Harvard - Institute of Economic Research.
  13. Benoit, Jean-Pierre & Krishna, Vijay, 1991. "Renegotiation in Finitely Repeated Games," Working Papers 91-34, C.V. Starr Center for Applied Economics, New York University.
  14. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers.
  15. Rubinstein, Ariel & Wolinsky, Asher, 1992. "Renegotiation-Proof Implementation and Time Preferences," American Economic Review, American Economic Association, vol. 82(3), pages 600-614, June.
  16. Dye, Ronald A, 1985. "Costly Contract Contingencies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 233-50, February.
  17. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
  18. Dilip Abreu & David Pearce & Ennio Stacchetti, 1989. "Renegotiation and Symmetry in Repeated Games," STICERD - Theoretical Economics Paper Series 198, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  19. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  20. Chung, Tai-Yeong, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 1031-42, October.
  21. 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.
  22. 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.
  23. Piccione Michele & Rubinstein Ariel, 1993. "Finite Automata Play a Repeated Extensive Game," Journal of Economic Theory, Elsevier, vol. 61(1), pages 160-168, October.
  24. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February.
  25. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November.
  26. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
  27. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April.
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