CARESS Working Paper # 00-04 Does Competition Solve the Hold-up Problem ? ∗

  title={CARESS Working Paper # 00-04 Does Competition Solve the Hold-up Problem ? ∗},
  author={Leonardo Felli and Kevin Roberts},
In an environment in which both buyers and sellers can undertake match specific investments, the presence of market competition for matches may solve hold-up and coordination problems generated by the absence of complete contingent contracts. In particular, this paper shows that when matching is assortative and sellers’ investments precede market competition then investments are constrained efficient. One equilibrium is efficient with efficient matches but also there can be equilibria with… CONTINUE READING


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