Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37037
Authors: 
Stremitzer, Alexander
Year of Publication: 
2008
Series/Report no.: 
Bonn econ discussion papers 2009,4
Abstract: 
When investments are nonverifiable, 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 first best. Yet, in order to lower informational requirements of courts, parties may opt for a specific performance regime which grants the breachedagainst 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

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