Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98478
Authors: 
Hart, Oliver
Year of Publication: 
2013
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Publisher:] MDPI [Place:] Basel [Volume:] 4 [Year:] 2013 [Issue:] 3 [Pages:] 437-456
Abstract: 
We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer's value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum can be achieved by giving the seller the right to make a take-it-or-leave-it offer. However, with shading, such a contract creates deadweight losses. We show that an optimal contract will limit the seller's offers, and possibly create ex post inefficiency. Asset ownership can improve matters even if revelation mechanisms are allowed.
Subjects: 
incomplete contracts
noncontractible investments
reference points
asset ownership
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
Appears in Collections:

Files in This Item:
File
Size
461.89 kB





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