Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/2244
Authors: 
Sander, Birgit
Year of Publication: 
1998
Series/Report no.: 
Kiel Working Paper 901
Abstract: 
Governments may draft contracts with market agents for allocating subsidies and pursuing specific policy goals. Contract enforcement via binding commitments is difficult, however, when exogenous (environmental) and endogenous (behavioural) risks interact. Analyzing the old debt compromise in east German housing, it results that a sophisticated design of contractual incompleteness may provide a reasonable safeguard against opportunistic behaviour. Yet it involves considerable costs and still does not guarantee that policy goals are achieved. The crucial policy question is if contracts can be drafted without creating a one-sided holdup potential or if governments should not co-operate with market agents but commit to policy rules.
JEL: 
C71
C78
D82
H54
K12
P20
P30
Document Type: 
Working Paper

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