When procurement contracts are incomplete, they are frequently changed after the contract is awarded to the lowest bidder. This results in a final cost that differs from the initial price, and may involve significant transaction costs due to renegotiation. We propose a stylized model of bidding...

The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from...

It has been claimed that the market fosters selfishness and thereby undermines the moral basis of society. This thesis has been developed with an emphasis on market exchange. Everyday life is, however, predominantly shaped by interactions in the workplace rather than by shopping behaviour. This...

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

The present paper aims to contribute to the literature on the foundations of incomplete contracts by providing conditions under which simple delegation of authority is the solution to the complete-contracting problem of the parties. We consider a hold-up framework where both parties profit from...

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...

Informal long-term relationships and mutual confidence play a crucial role in modern economies in at least two dimensions. First, the performance of firms is strongly affected by their capacity to solve organizational questions effectively and this capacity is apparently strongly related to...

Rugby union only went professional in 1995, much later than other major team sports resulting in major changes in league structures. Different arrangements regarding revenue sharing and salary caps between the three main European rugby leagues provides an opportunity to test the impact of such...

In this paper, a formal rent-seeking theory of the firm is developed. The main idea is that integration (compared to non-integration) facilitates rent-seeking for the integrating party, but makes it harder for the integrated one. In a one-period model, this implies that the rent-seeking contest...

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...