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http://hdl.handle.net/10419/18836
  

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dc.contributor.authorHolden, Helgeen_US
dc.contributor.authorHolden, Larsen_US
dc.contributor.authorHolden, Steinaren_US
dc.date.accessioned2009-01-28T15:53:13Z-
dc.date.available2009-01-28T15:53:13Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/18836-
dc.description.abstractConsider a contract over trade in continuous time between two players, according to which one player makes a payment to the other, in exchange for an exogenous service. At each point in time, either player may unilaterally require an adjustment of the contract payment, involving adjustment costs for both players. Players? payoffs from trade under the contract, as well as from trade under an adjusted contract, are exogenous and stochastic. We consider players? choice of whether and when to adjust the contract payment. It is argued that the optimal strategy for each player is to adjust the contract whenever the contract payment relative to the outcome of an adjustment passes a certain threshold, depending among other things of the adjustment costs. There is strategic substitutability in the choice of thresholds, so that if one player becomes more aggressive by choosing a threshold closer to unity, the other player becomes more passive. If players may invest in order to reduce the adjustment costs, there will be over-investment compared to the welfare maximizing levels.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesCESifo working papers 1472en_US
dc.subject.jelC72en_US
dc.subject.jelE31en_US
dc.subject.jelC78en_US
dc.subject.jelC73en_US
dc.subject.ddc330en_US
dc.subject.stwVertragstheorieen_US
dc.subject.stwBetriebliche Preispolitiken_US
dc.subject.stwVerhandlungstheorieen_US
dc.subject.stwNichtkooperatives Spielen_US
dc.subject.stwAnpassungen_US
dc.subject.stwTheorieen_US
dc.titleContract adjustment under uncertaintyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn488943280en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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