Contracting still matters! Or: how to design a letter of intent

Arbeitspapier

Any cooperation that profits from relation-specific investments suffers from the well-known hold-up problem. If investments are not enforceable by an outside authority, the gains fall prey to individual opportunism caused by a free-rider problem. If, in addition, individual investments exhibit positive cross effects, Che and Hausch (1999) provide a negative result and show that contracts cannot overcome the hold up due to a lack of verifiable commitment. This paper develops a mechanism that provides such a commitment device: (1) It introduces an acknowledgement game that procures reliable. (2) It embeds the original contracting problem into two institutional designs - a market based one and a private design - that support enforcement. These two devices reestablish efficient investments as enforceable results of a contract.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 2009,09

Klassifikation und Themen

• Klassifikation: Wirtschaft

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Korn, Evelyn ; Meisenzahl, Stephan
• Ereignis: Veröffentlichung
• (wer): Philipps-University Marburg, Faculty of Business Administration and Economics
• (wo): Marburg
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/30096
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ