Felli, Leonardo and Roberts, Kevin (2015) Does competition solve the hold-up problem? Economica. ISSN 0013-0427
Full text not available from this repository.Abstract
In an environment in which heterogeneous buyers and sellers undertake ex ante investments, the presence of market competition for matches provides incentives for investment but may leave inefficiencies, namely hold-up and coordination problems. This paper shows, using an explicitly non-cooperative model, that when matching is assortative and investments precede market competition, buyers' investments are constrained efficient while sellers marginally underinvest with respect to what would be constrained efficient. However, the overall extent of this inefficiency may be large. Multiple equilibria may arise; one equilibrium is characterized by efficient matches, but there can be additional equilibria with coordination failures.
Item Type: | Article |
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Official URL: | http://onlinelibrary.wiley.com/journal/10.1111/(IS... |
Additional Information: | © 2015 The London School of Economics and Political Science |
Divisions: | LSE |
Subjects: | H Social Sciences > HB Economic Theory Q Science > QA Mathematics |
Date Deposited: | 09 Dec 2015 15:23 |
Last Modified: | 12 Jun 2024 07:33 |
URI: | http://eprints.lse.ac.uk/id/eprint/64641 |
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