We show that the effect of eviction threats on unobservable investment effort can be positive. We demonstrate this … apparently counter-intuitive result in a model of tenancy where investment by a tenant in the current period raises the chances … attractive for him to elicit investment effort. However, there is a direct negative effect of eviction threats on the tenant …

This paper studies investment incentives in the steady state of a dynamic bilateral matching market. Because of search … underinvestment on both sides of the market. But when market frictions become negligible, the equilibrium investment levels tend …