Arbeitspapier
Formal contracts, relational contracts, and the holdup problem
We study the holdup problem in repeated transactions between a seller and a buyer such that the seller makes relation-specific investments in each period. We show that where, under spot transaction, formal contracts have no value because of the cooperative nature of investment, writing a simple fixed-price contract can be valuable under repeated transactions: There is a range of parameter values in which a higher investment can be implemented only if a formal price contract is written and combined with a relational contract. We also show that there are cases in which not writing a formal contract but entirely relying on a relational contract increases the total surplus of the buyer and the seller. The key condition is how the investment affects the renegotiation price in general, and the alternative-use value in particular.
- Sprache
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Englisch
- Erschienen in
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Series: CESifo Working Paper ; No. 1786
- Klassifikation
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Wirtschaft
Organizational Behavior; Transaction Costs; Property Rights
Transactional Relationships; Contracts and Reputation; Networks
Firm Organization and Market Structure
Contracting Out; Joint Ventures; Technology Licensing
- Ereignis
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Geistige Schöpfung
- (wer)
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Itoh, Hideshi
Morita, Hodaka
- Ereignis
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Veröffentlichung
- (wer)
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Center for Economic Studies and ifo Institute (CESifo)
- (wo)
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Munich
- (wann)
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2006
- Handle
- Letzte Aktualisierung
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20.09.2024, 08:21 MESZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Itoh, Hideshi
- Morita, Hodaka
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2006