This article examines empirically the hypothesis that incomplete contracts and resulting opportunistic behavior over the return to sunk assets reduces investment. Union-firm contracts are incomplete because they (1) do not prevent all actions aimed at changing the existing contract; (2) cover a...

Many recent game-theoretic models suggest that, with asymmetric information, it can be profitable for firms to acquire a reputation for toughness to discourage later entry. The authors identify institutional arrangements that firms must undertake if predatory commitments are to be credible. For...