This paper explores the extent to which the presence of ex-ante transaction costs may lead to failures of the Coase Theorem. In particular we identify and investigate the basic 'hold-up problem' which arises whenever the parties to a Coasian negotiation have to pay some ex-ante costs for the...

We identify the inefficiencies that arise when negotiation between two parties takes place in the presence of transaction costs. First, for some values of these costs it is efficient to reach an agreement but the unique equilibrium outcome is one in which agreement is never reached. Secondly,...

We study a contracting model with unforeseen contingencies in which the court is an active player. Ex-ante, the contracting parties cannot include the risky unforeseen contingencies in the contract they draw up. Ex-post the court observes whether an unforeseen contingency occurred, and decides...

In this paper we present a citizen-candidate model of representative democracy with endogenous lobbying. We find that lobbying induces policy compromise and always affects equilibrium policy outcomes. In particular, even though the policy preferences of lobbies are relatively extreme, lobbying...

We identify and investigate the basic 'hold-up problem' which arises whenever each party to a contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a 'contractual solution' to this hold-up problem is not available....

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...

We describe and analyze a contractual environment that allows a role for an active court.The model we analyze is the same as in Anderlini, Felli, and Postlewaite (2006). Anactive court can improve on the outcome that the parties would achieve without it. Theinstitutional role of the court is to...

In an environment in which heterogenous buyers and sellers undertake ex-ante investments, the presence of market competition for matches provides incentives for investment but may leave inefficiencies that take the form of hold-up and coordination problems. This paper shows, using an explicitly...

This paper explores the link between boundedly rational behaviour and incomplete contracts. The bounded rationality of the agents in our world is embodied in a constraint that the contracts they write must be algorithmic in nature. We start with a definition of contract incompleteness that seems...

We study wage determination in a job-matching model, under the assumption that wages may be continuously renegotiated, so as to reflect the employee's endogenous outside option. We characterize the unique equilibirum of the model and we analyse the distribution of producer surplus. The model is...