Strategic Defection in Bilateral Trade

Arbeitspapier

The paper studies a generic bilateral trade model with relationship-specific investments. Only the seller invests, and subsequent trade becomes inefficient if his investments are too low. We show that the seller may defect strategically under a fixed-price contract even though he attains any arbitrary surplus when expending the (second-best) investment. In this case, no general mechanism facilitates trade and the parties should not start their relationship. Also, the defection problem may be more severe when the parties trade after the buyer's valuation has been disclosed, as compared to a situation where the parties have to complete trade under uncertainty.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bonn Econ Discussion Papers ; No. 4/2001

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; National Government Expenditures and Related Policies: Procurement ; Economics of Regulation
• Thema: Bilateral Trade ; Hold-Up ; Specific Investments ; Incomplete Contracts

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lülfesmann, Christoph
• Ereignis: Veröffentlichung
• (wer): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (wo): Bonn
• (wann): 2001

Weitere Informationen

• Handle: http://hdl.handle.net/10419/78430
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ