Contracting with Third Parties

In bilateral holdup and moral hazard in teams models, introducing a third party allows implementation of the first best, even if renegotiation is possible. Fines paid to the third party provide incentives for truth-telling and investment. This result holds even if the third party is corruptible, as long as the grand coalition has access to the same contracting technology as any colluding subcoalition. (JEL D86, D82)

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Year of publication:	2009
Authors:	Baliga, Sandeep ; Sjöström, Tomas
Published in:	American Economic Journal: Microeconomics. - American Economic Association - AEA. - Vol. 1.2009, 1, p. 75-100
Publisher:	American Economic Association - AEA

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Extent:	application/pdf
Type of publication:	Article
Notes:	DOI: 10.1257/mic.1.1.75
Classification:	D82 - Asymmetric and Private Information ; D86 - Economics of Contract: Theory
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005563200