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Contractual signaling, relationship-specific investment and exclusive agreements

Vasconcelos, Luis (2014) 'Contractual signaling, relationship-specific investment and exclusive agreements.' Games and Economic Behavior, 87. 19 - 33. ISSN 0899-8256


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I analyze a model of hold-up with asymmetric information at the contracting stage. The asymmetry of information concerns the value of trade with external parties. I show that contractual signaling and efficiency of investment can conflict if only quantity is contractible. This conflict generates inefficient equilibria in terms of investment. Contracting on exclusivity in addition to quantity resolves the conflict and consequently eliminates the inefficiency of investment.

Item Type: Article
Uncontrolled Keywords: Relationship-specific investment; Asymmetric information; Exclusivity
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 14 Jan 2015 15:23
Last Modified: 02 Nov 2020 12:15

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