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Costly coasian contracts

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We identify and investigate the basic ‘hold-up problem’ which arises whenever each party to a contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a ‘contractual solution’ to this hold-up problem is not available. This is because a contractual solution to the hold-up problem typically entails writing a ‘contract over a contract’ which generates a fresh set of ex-ante costs, and hence is associated with a new hold-up problem.

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en

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application/pdf

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http://eprints.lse.ac.uk/3583/1/Costly_coasian_contracts%28TE-98-362%29.pdf

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