Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/37037 
Year of Publication: 
2008
Series/Report no.: 
Bonn Econ Discussion Papers No. 4/2009
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
Abstract: 
When investments are non-verifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling “expectation damages” close to legal practice, we show that the default remedy of contract law induces the ?rst best. Yet, in order to lower informational requirements of courts, parties may opt for a "specific performance" regime which grants the breached-against buyer an option to choose "restitution" if the tender’s value falls below some (arbitrarily chosen) quality threshold. In order to implement this regime, no more information needs to be verifiable than is implicitly assumed in Che and Hausch (1999).
Subjects: 
breach remedies
incomplete contracts
cooperative investments
JEL: 
K12
L22
J41
C70
Document Type: 
Working Paper

Files in This Item:
File
Size
401.08 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.