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http://ssrn.com/abstract=1162792
 
 

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Standard Breach Remedies, Quality Thresholds, and Cooperative Investments


Alexander Stremitzer


UCLA School of Law

April 4, 2010

Journal of Law, Economics, and Organization, 2012, 28(2): 337-359.
Columbia Law and Economics Working Paper No. 335

Abstract:     
When investments are non-verifiable, inducing cooperative investments with simple contracts may not be as difficult as previously thought. Indeed, modeling “expectation damages” close to legal practice, we show that the commonly applied remedy of US contract law induces the first best. Yet, in order to lower informational requirements of courts, parties may opt for a "specific performance" regime which grants the breached- against buyer an option to choose "restitution" if the tender’s value falls below some (arbitrarily chosen) quality threshold. In order to implement this regime, no more information needs to be verifiable than is implicitly assumed in Che and Hausch (1999).

Number of Pages in PDF File: 30

Keywords: breach remedies, incomplete contracts, cooperative investments

JEL Classification: K12, L22, J41, C70

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Date posted: July 19, 2008 ; Last revised: November 13, 2013

Suggested Citation

Stremitzer, Alexander, Standard Breach Remedies, Quality Thresholds, and Cooperative Investments (April 4, 2010). Columbia Law and Economics Working Paper No. 335; Journal of Law, Economics, and Organization, 2012, 28(2): 337-359. ; Columbia Law and Economics Working Paper No. 335. Available at SSRN: http://ssrn.com/abstract=1162792 or http://dx.doi.org/10.2139/ssrn.1162792

Contact Information

Alexander Stremitzer (Contact Author)
UCLA School of Law ( email )
405 Hilgard Avenue
Box 90095-1476
Los Angeles, CA 90095-1476
United States
HOME PAGE: http://www.law.ucla.edu/faculty/all-faculty-profiles/professors/Pages/Alexander-Stremitzer.aspx
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