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Competition and Hold-Ups

Author

Listed:
  • Felli, L.
  • Roberts, K.

Abstract

In an environment in which both workers and firms undertake match specific investments, the presence of market competition for matches may solve the hold-up problems generated by the absence of complete contingent contracts. In particular, this paper shows that in a world in which workers' and firms' investments are separeted by market competition and contracts specify a simple (non-contingent) wage payment, investments are constrained efficient. Indeed, workers and firms invest efficiently given the equilibrium matches in which they are involved.

Suggested Citation

  • Felli, L. & Roberts, K., 1999. "Competition and Hold-Ups," Economics Papers 1999-w17, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:1999-w17
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    Cited by:

    1. Deishin Lee & Haim Mendelson, 2007. "Adoption of Information Technology Under Network Effects," Information Systems Research, INFORMS, vol. 18(4), pages 395-413, December.

    More about this item

    Keywords

    COMPETITION ; MARKET STRUCTURE ; CONTRACTS;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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