Artikel
Rigidity in bilateral trade with holdup
This paper studies bilateral trade in which the seller makes a hidden investment that influences the buyer's hidden valuation. In general it is impossible to implement both first-best efficient trade and efficient investment using budget-balanced trading mechanisms. The paper fully characterizes the constrained efficient contracts. It is shown that the optimal tradeoff between allocative efficiency and incentive provision results in rigidity in trade, the degree of which depends on the seriousness of the holdup problem. Sufficient conditions are also provided for full separation of buyer types to take place in optimal contracts when the holdup problem is not too severe. The seller may overinvest relative to the first best.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 3 ; Year: 2008 ; Issue: 1 ; Pages: 85-121 ; New York, NY: The Econometric Society
- Klassifikation
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Wirtschaft
Noncooperative Games
Production and Organizations: General
Asymmetric and Private Information; Mechanism Design
- Thema
-
Bilateral contracting
hidden action and hidden information
holdup problem
nonlinear pricing
- Ereignis
-
Geistige Schöpfung
- (wer)
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Zhao, Rui R.
- Ereignis
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Veröffentlichung
- (wer)
-
The Econometric Society
- (wo)
-
New York, NY
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:46 MEZ
Datenpartner
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Objekttyp
- Artikel
Beteiligte
- Zhao, Rui R.
- The Econometric Society
Entstanden
- 2008
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