"This paper considers optimal contracts in supply chains that consist of"<formula format="inline"><simplemath>"n"≥ 2</simplemath></formula>"firms and face a potential investment hold-up problem. We show that option contracts may solve the incentive problems. First, we provide case-study evidence for the use of option contracts in the semiconductor...

Economic theories explaining the existence of stable cartels are still rare. The paper offers a generalization of the D'Aspremont, Jacquemin, Gabszewicz and Weymark [1983] approach of stable cartels in a static "small world" framework taking into account that suppliers may differ with respect to...

We analyze foreign direct investment (FDI) from two theoretical perspectives: the traditional economic perspective and the more recent institutional perspective. By combining a theoretical analysis with empirical tests, we are able to explore the explanatory power of both economic and...

We reconsider the hold-up problem under symmetric information when more than two parties form a 'supply chain'. The parties are assumed to renegotiate bilaterally and sequentially. Potential trade distortions then arise in addition to the usual investment problem. Following Edlin and...

Rumors about tax rate changes usually lead to moaning lobbyists and firm representatives publicly forecasting that investment within their industry will be doomed to death for the coming years. It is the aim of this paper to analyze whether the threat of imposing a sales tax can lead to a...