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On simple contracts, renegotiation under asymmetric information, and the hold-up problem

  • Schmitz, Patrick W.

In this paper it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non-trivial. It is argued that the default decision may be interpreted as a 'simple' contract that the parties have written ex ante. This result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold-up problem to be solved, even if the parties' valuations are private information.

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File URL: https://mpra.ub.uni-muenchen.de/12530/1/MPRA_paper_12530.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12530.

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Date of creation: 2002
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Handle: RePEc:pra:mprapa:12530
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