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Direct externalities, specific performance and renegotiation design

Author

Listed:
  • Mhand Fares

    (MOISA and University of Paris 1 (ATOM))

Abstract

This paper examines how the model of De Fraja [Games and Economic Behavior, 1999] can be amended after Che [Games and Economic Behavior, 2000] negative result. We mainly show that the optimal level of investments can be obtained with the specific performance contract considered by De Fraja if the renegotiation process does not follow the Hart-Moore procedure but allocates an extreme bargaining power.

Suggested Citation

  • Mhand Fares, 2005. "Direct externalities, specific performance and renegotiation design," Economics Bulletin, AccessEcon, vol. 3(28), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-05c70008
    as

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    References listed on IDEAS

    as
    1. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-282, March.
    2. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    3. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    4. Tai-Yeong Chung, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(5), pages 1031-1042.
    5. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
    6. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
    7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    incomplete contract hold-up;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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