18 research outputs found
Breach Remedies Including Hybrid Investments
We show that parties in bilateral trade can rely on the default common law breach remedy of âexpectation damagesâ to induce simultaneously ?rst-best relationship-speci?c investments of both the sel?sh and the cooperative kind. This can be achieved by writing a contract that speci?es a suffciently high quality level. In contrast, the result by Che and Chung (1999) that âreliance damagesâ induce the ?rstbest in a setting of purely cooperative investments, does not generalize to the hybrid case. We also show that if the quality speci?ed in the contract is too low, âexpectation damagesâ do not necessarily induce the ex-post effcient trade decision in the presence of cooperative investments
Breach Remedies Including Hybrid Investments
We show that parties in bilateral trade can rely on the default common law breach remedy of âexpectation damagesâ to induce simultaneously ?rst-best relationship-speci?c investments of both the sel?sh and the cooperative kind. This can be achieved by writing a contract that speci?es a suffciently high quality level. In contrast, the result by Che and Chung (1999) that âreliance damagesâ induce the ?rstbest in a setting of purely cooperative investments, does not generalize to the hybrid case. We also show that if the quality speci?ed in the contract is too low, âexpectation damagesâ do not necessarily induce the ex-post effcient trade decision in the presence of cooperative investments.breach remedies; incomplete contracts; hybrid investments; cooperative investments; sel?sh investments
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Breach remedies inducing hybrid investments
We show that parties in bilateral trade can rely on the default common law breach remedy of âexpectation damagesâ to simultaneously induce first-best relationship-specific investments of both the selfish and the cooperative kind. This can be achieved by writing a contract that specifies a sufficiently high quality level. In contrast, the result by Che and Chung (1999) that âreliance damagesâ induce the first best in a setting of purely cooperative investments, does not generalize to the hybrid case
Breach remedies inducing hybrid investments
We show that parties in bilateral trade can rely on the default common law breach remedy of âexpectation damagesâ to simultaneously induce first-best relationship-specific investments of both the selfish and the cooperative kind. This can be achieved by writing a contract that specifies a sufficiently high quality level. In contrast, the result by Che and Chung (1999) that âreliance damagesâ induce the first best in a setting of purely cooperative investments, does not generalize to the hybrid case