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| Author: | Reiche, S. |
| Title: | Ambivalent investment and the hold-up problem |
| Journal: | Journal of the European Economic Association
2006 : DEC, VOL. 4:6, p. 1148-1164 |
| Index terms: | investment contracts negotiation models |
| Language: | eng |
| Abstract: | This paper adds to the foundations of incomplete contracting literature studying the hold-up problem with ambivalent investment (here as: inv.), where inv. benefits the investing party (as: inv-pty.) if, ex post, the right decision is made but harms the inv-pty. if the wrong decision is made. It is shown that the power of contracts to provide inv. incentives depends on 3 factors: i. the commitment value of contracts, ii. the amount of quasirents that the inv-pty. can expect in the case of out-of-contract renegotiation, and iii. the degree of ambivalence of investment. |
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