Expectation Damages, Divisible Contracts, and Bilateral Investment

Arbeitspapier

This paper examines the efficiency of expectation damages as a breach remedy in a bilateral trade setting with renegotiation and relationship-specific investment by the buyer and the seller. As demonstrated by Edlin and Reichelstein (1996), no contract that specifies only a fixed quantity and a fixed per-unit price can induce efficient investment if marginal cost is constant and deterministic. We show that this result does not extend to more general payoff functions. If both parties face the risk of breaching, the first best becomes attainable with a simple price-quantity contract.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SFB/TR 15 Discussion Paper ; No. 231

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Contract Law ; Economics of Contract: Theory ; Transactional Relationships; Contracts and Reputation; Networks
• Thema: breach remedies ; renegotiation ; hold-up

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Ohlendorf, Susanne
• Ereignis: Veröffentlichung
• (wer): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (wo): München
• (wann): 2008

Weitere Informationen

• DOI: doi:10.5282/ubm/epub.13321
• Handle: http://hdl.handle.net/10419/94047
• URN: urn:nbn:de:bvb:19-epub-13321-2
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ