Title: After You Sir. Hold-Up, Direct Externalities, and Sequential Investment
Abstract: We propose a solution to the hold-up problem: the parties in a contract can avoid the inefficiencies caused by the possibility of opportunistic behaviour and implement the first best level of investment if they make their investment decision sequentially, one party observing the choice made by the other party before making his own choice. Unlike the existing literature, the proposed solution leads to the efficient choice of investment even when there are two-sided direct externalities.Journal of Economic LiteratureClassification Numbers: D23, D82.
Publication Year: 1999
Publication Date: 1999-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 55
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