Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/18836 
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dc.contributor.authorHolden, Helgeen
dc.contributor.authorHolden, Larsen
dc.contributor.authorHolden, Steinaren
dc.date.accessioned2009-01-28T15:53:13Z-
dc.date.available2009-01-28T15:53:13Z-
dc.date.issued2005-
dc.identifier.urihttp://hdl.handle.net/10419/18836-
dc.description.abstractConsider a contract over trade in continuous time between two players, according to whichone player makes a payment to the other, in exchange for an exogenous service. At each pointin 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, aswell as from trade under an adjusted contract, are exogenous and stochastic. We considerplayers? choice of whether and when to adjust the contract payment. It is argued that theoptimal strategy for each player is to adjust the contract whenever the contract paymentrelative to the outcome of an adjustment passes a certain threshold, depending among otherthings of the adjustment costs. There is strategic substitutability in the choice of thresholds, sothat if one player becomes more aggressive by choosing a threshold closer to unity, the otherplayer 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
dc.language.isoengen
dc.publisher|aCenter for Economic Studies and ifo Institute (CESifo) |cMunichen
dc.relation.ispartofseries|aCESifo Working Paper |x1472en
dc.subject.jelC72en
dc.subject.jelE31en
dc.subject.jelC78en
dc.subject.jelC73en
dc.subject.ddc330en
dc.subject.stwVertragstheorieen
dc.subject.stwBetriebliche Preispolitiken
dc.subject.stwVerhandlungstheorieen
dc.subject.stwNichtkooperatives Spielen
dc.subject.stwAnpassungen
dc.subject.stwTheorieen
dc.titleContract adjustment under uncertainty-
dc.typeWorking Paperen
dc.identifier.ppn488943280en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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