Universität zu Köln

Goldluecke, Susanne and Schmitz, Patrick W. (2014). Investments as signals of outside options. J. Econ. Theory, 150. S. 683 - 709. SAN DIEGO: ACADEMIC PRESS INC ELSEVIER SCIENCE. ISSN 1095-7235

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Abstract

Consider a seller who can make an observable but non-contractible investment to improve an intermediate good that is specialized to a particular buyer's needs. The buyer then makes a take-it-or-leave-it offer to the seller. The seller has private information about the fraction of the ex post surplus that he can realize on his own. Compared to a situation with complete information, additional investment incentives are generated by the seller's desire to pretend a strong outside option. On the other hand, ex post efficiency is not attained since asymmetric information at the bargaining stage sometimes leads to inefficient separations. (C) 2014 Elsevier Inc. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Goldluecke, Susanne UNSPECIFIED UNSPECIFIED UNSPECIFIED Schmitz, Patrick W. UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-444425
DOI:	10.1016/j.jet.2013.12.001
Journal or Publication Title:	J. Econ. Theory
Volume:	150
Page Range:	S. 683 - 709
Date:	2014
Publisher:	ACADEMIC PRESS INC ELSEVIER SCIENCE
Place of Publication:	SAN DIEGO
ISSN:	1095-7235
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language HOLD-UP; PROPERTY-RIGHTS; INFORMATION; FIRM; CONTRACTS; COSTS Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/44442