In this paper it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non-trivial. It is argued that the default decision may be interpreted as a 'simple' contract that the parties have...

This paper studies alternative contract damage measures in the presence of specific investments that generate a direct benefit to the investor's trading partner (referred to as "cooperative investments"). We find that, both with and without the possibility of ex post renegotiation, (i) the...

Structuring contracts to share risk in light of incentive problems is the central premise of contract theory, yet the risk-sharing implications have rarely been thoroughly tested using micro-level contract data. In this paper we test the major implications of a principal-agent model of contracts...

It is well-known that a seller imposed non-discrimination clause can soften downstream price competition by constraining opportunistic pricing behavior on the part of an upstream monopolist seller. But what about about market settings in which there exists a pivotal buyer? We show that in the...

In many capital-intensive markets, sellers sign long-term contracts with buyers before committing to sunk cost investments. Ex-ante contracts mitigate the risk of under-investment arising from ex-post bargaining. However, contractual rigidities reduce the ability of firms to respond flexibly to...

In a property-rights framework, we study how the organizational form and quantity contracts interact in generating investment incentives. Our model nests standard property-rights and hold-up models as special cases. We admit general message-dependent contracts but provide conditions under which...

We suggest and provide empirical evidence that the bargaining power of alliance partners stemming from their prominence in alliance networks influences the ex-ante allocation of value capturing rights in high-tech alliance contracts. Network prominence can enhance the availability of alternative...

This chapter surveys major issues arising in the economic analysis of contract law. It begins with an introductory discussion of scope and methodology, and then addresses four main topics that correspond to the major doctrinal divisions of the law of contracts. These divisions include freedom of...

We study the holdup problem in repeated transactions between a seller and a buyer such that the seller makes relation-specific investments in each period. We show that where, under spot transaction, formal contracts have no value because of the cooperative nature of investment, writing a simple...

Can formal contracts help resolving the holdup problem? We address this important question by studying the holdup problem in repeated transactions between a seller and a buyer in which the seller can make relation-specific investments in each period. In contrast to previous findings, we...