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Competition and Hold-ups

  • Kevin Roberts
  • Leonardo Felli

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 separated 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.

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File URL: http://www.nuff.ox.ac.uk/economics/papers/1999/w17/Hold-ups.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 1999-W17.

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Date of creation: 01 Jun 1999
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Handle: RePEc:oxf:wpaper:1999-w17
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  1. Maskin, Eric & Tirole, Jean, 1999. "Two Remarks on the Property-Rights Literature," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 139-49, January.
  2. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  3. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
  4. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  5. Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation: A solution to the Hold-Up Problem," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
  6. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  7. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  8. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
  9. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  10. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 445-64, July.
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