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
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 1786

Klassifikation
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
Geistige Schöpfung
(wer)
Itoh, Hideshi
Morita, Hodaka
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2006

Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Itoh, Hideshi
  • Morita, Hodaka
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2006

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