This study aims to provide a formal haggling theory of firm boundaries. In the face of unforeseen disturbances in trade circumstances, trading parties engage in ex post contract renegotiation, which ends with either agreement, disagreement, or third-party intervention. Given that the third-party...

This study introduces a hold-up cost (i.e., the cost of acquiring information regarding a transacting partner's relationship-specific investment to substantiate the need for contract renegotiation) in the model of the property-rights theory. As is widely accepted, the costs of accessing relevant...