Competition and Hold-Ups

21 Pages Posted: 12 Aug 1999

See all articles by Leonardo Felli

Leonardo Felli

University of Cambridge, Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Kevin W.S. Roberts

Nuffield College, Oxford

Date Written: June 1999

Abstract

In an environment in which both workers and firms undertake match specific investments, the presence of market competition for matches may solve the hold-up problems generated by the absence of complete contingent contracts. In particular, this paper shows that in a world in which workers' and firms' investments are separated by market competition and contracts specify a simple (non-contingent) wage payment, investments are constrained efficient. Indeed, workers and firms invest efficiently given the equilibrium matches in which they are involved.

JEL Classification: C78, D23

Suggested Citation

Felli, Leonardo and Roberts, Kevin W.S., Competition and Hold-Ups (June 1999). Available at SSRN: https://ssrn.com/abstract=171920 or http://dx.doi.org/10.2139/ssrn.171920

Leonardo Felli (Contact Author)

University of Cambridge, Faculty of Economics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 335221 (Phone)

HOME PAGE: http://www.felli.info

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kevin W.S. Roberts

Nuffield College, Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 278 601 (Phone)
+44 1865 278 557 (Fax)

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