Information Gathering and the Hold-Up Problem in a Complete Contracting Framework

15 Pages Posted: 2 Dec 2008

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

Date Written: October 2008

Abstract

In a complete contracting model, a risk-neutral seller exerts effort while producing a good. Effort is a hidden action and stochastically influences the risk-neutral buyer's valuation. Then the buyer can gather private information about his valuation. The ex ante optimal contract may encourage information gathering, even though it is commonly known that it is ex post efficient to trade regardless of the buyer's valuation (so that information gathering is a strategic, unproductive rent-seeking activity). Information gathering occurs even more often if it is a verifiable action.

Keywords: complete contracting, hold-up problem, Information gathering

JEL Classification: D82, D86

Suggested Citation

Schmitz, Patrick W., Information Gathering and the Hold-Up Problem in a Complete Contracting Framework (October 2008). CEPR Discussion Paper No. DP6988. Available at SSRN: https://ssrn.com/abstract=1308059

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
3
Abstract Views
257
PlumX Metrics