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...

In this paper we discuss the role of private information in buyer - seller relationships. We distinguish between pre- and postcontractual asymmetric information. In each case, we discuss the role of the bargaining protocol and we explore whether it is possible to achieve the first-best outcome.

Die Rolle von privater Information in der Kontraktheorie wird anhand einfacher Tauschmodelle beleuchtet. Es wird zwischen den Konsequenzen von asymmetrischer Information vor und nach Vertragsabschluß unterschieden und jeweils der Frage nachgegangen, inwieweit der Verhandlungsprozeß von...

We study an adverse selection problem in which information that is imperfectly correlated with the agent's type becomes public ex post. Unbounded penalties are ruled out by assuming that the agent is wealth constrained. The following conclusions emerge. If the agent's utility is increasing in...

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...