Reliance Investments, Expectation Damages and Hidden Information

Arbeitspapier

A setting of reliance investments is explored where one of the parties to a contract obtains private information concerning his utility or cost function that remains hidden to the other party and to courts. As a consequence, it will be a difficult task to award expectation damages corrrectly to a party with private information who sufffers from breach of contract. While a revelation mechanism would exist that leads to the first best solution, assessing expectation damages correctly turns out to be at odds with ex post efficiency. I conclude that, under asymmetric information, the performance of expectation damages falls short of what more general mechanisms could achieve.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB/TR 15 Discussion Paper ; No. 162

Classification and Topics

• Classification: Wirtschaft ; Contract Law ; Asymmetric and Private Information; Mechanism Design
• Subject: reliance investments ; expectation damages ; breach of contract ; hidden information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schweizer, Urs
• Event: Veröffentlichung
• (who): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (where): München
• (when): 2006

Further information

• DOI: doi:10.5282/ubm/epub.13389
• Handle: http://hdl.handle.net/10419/93957
• URN: urn:nbn:de:bvb:19-epub-13389-3
• Last update: 10.03.2025, 11:44 AM CET