Competition and the Hold‐Up Problem: a Setting with Non‐exclusive Contracts

Research output: Working paper

Abstract

This work studies how the introduction of competition to the side of the market offering trading contracts affects the equilibrium investment profile in a bilateral investment game. By using a common agency framework, where contracts are not exclusive, we find that the equilibrium investment profile depends on the competitiveness of the equilibrium outcome. Full efficiency can only be implemented when the trading outcome is the most competitive. Moreover, lowering the outcome competitiveness is not always Pareto dominant for the par- ties offering the contracts and larger social welfare can be obtained with low competitive equilibria.
Original languageEnglish (US)
Pages1-52
Number of pages52
StatePublished - Mar 2014
Externally publishedYes

Publication series

NameTSE Working Papers
PublisherToulouse School of Economics
No.481
Volume14

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

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