Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22970 
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dc.contributor.authorOhlendorf, Susanneen
dc.date.accessioned2009-01-29T15:11:30Z-
dc.date.available2009-01-29T15:11:30Z-
dc.date.issued2006-
dc.identifier.urihttp://hdl.handle.net/10419/22970-
dc.description.abstractWe consider a bilateral trade setting with costless renegotiation and investment by both the buyer and the seller. Whether first best levels of relationship-specific investment can be induced by a simple contract depends on available breach remedies. As demonstrated by Edlin and Reichelstein (1996), a contract specifying an up-front transfer, a quantity and a per-unit price is in general not able to achieve the first best when the breach remedy is expectation damages. We show that this result is due to the linearity of the cost function in their counterexample, and does not extend beyond the linear case. If marginal cost is increasing, then at intermediate prices both parties face the risk of breaching, and the first best becomes attainable.en
dc.language.isoengen
dc.publisher|aUniversity of Bonn, Bonn Graduate School of Economics (BGSE) |cBonnen
dc.relation.ispartofseries|aBonn Econ Discussion Papers |x25/2006en
dc.subject.jelD86en
dc.subject.jelK12en
dc.subject.jelL14en
dc.subject.ddc330en
dc.subject.keywordexpectation damagesen
dc.subject.keywordbreach remediesen
dc.subject.keywordrenegotiationen
dc.subject.keywordhold-upen
dc.titleExpectation Damages, Divisible Contracts, and Bilateral Investment-
dc.typeWorking Paperen
dc.identifier.ppn525236449en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:bonedp:252006-

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