In the early models of incomplete contract neither party used to invest in the subject matter of the contract; those models primarily kept their focus on analyzing the effect of legal rules on parties' incentives to trade or to breach. The modern models stretched beyond that to include value...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...

The acquisition of information prior to sale gives rise to a hold-up situation quite naturally. Yet, while the bulk of the literature on the hold-up problem considers negotiations under symmetric information where cooperative short-cuts such as split the difference capture the outcome of...

A setting of reliance investments is explored where one of the parties to a contract obtains private information concerning his utility or cost function that remains hidden to the other party and to courts. As a consequence, it will be a difficult task to award expectation damages corrrectly to...

In the hold-up problem incomplete contracts cause the proceeds of relation-specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...

In the hold-up problem incomplete contracts cause the proceeds of relation specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...

Under information asymmetry, lemons tend to be overpriced. Yet, how much overpricing premium the lemons can command is contingent on the underlying legal institutions. A set of transaction data from Hong Kong's housing market reveals that durable lemons are overpriced by 6.7% and 9.9% under the...

Using data from SEC filings, I show that the typical bank loan is renegotiated five times, or every nine months. The pricing, maturity, amount, and covenants are all significantly modified during each renegotiation, whose timing is governed by the financial health of the contracting parties and...