In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem, in particular when renegotiation cannot be prevented. Ultimately, this question has to be answered empirically. As a first step, we have conducted a laboratory experiment with...

In this paper it is argued that privatization is not the only alternative to public ownership. Adopting the incomplete contract approach, it is shown that partial privatization, i.e. joint ownership, may well turn out to be the optimal property rights regime, if the trade-offs that have been...

We analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the intensity of specialization towards the buyer's needs. A basic trade-off arises: While non-integration leads to higher investment incentives, potential...

This article analyzes a much debated clause in the coalition contract between SPD and FDP in Rheinland-Pfalz. Two parties write a contract, based on which decisions under incomplete information have to be made at a later point in time. It is shown that a complex complete contract can achieve the...

We consider the case of an upstream seller who works to improve an asset that has been specialized to a downstream buyer's needs. The buyer then makes a take it or leave it offer to the seller about how the future surplus should be split. We assume that the seller from the outset has private...