0000000000045868
AUTHOR
Concepción Peñarrubia
Specific investments and coordination failures
This note presents a new result on incomplete contracts. We show that if the different degrees of relation-specificity of the partnerts' investments determines their ex post bargaining position (what Williamson (1985) calls “the fundamental transformation†), it will appear a potential coordination failure. Under plausible conditions, the parties will coordinate in the more inefficient but less risky equilibrium, that is, in the risk-dominant equilibrium in the sense of Harsanyi and Selten (1988).
Hold up and intergenerational transmission of preferences
This paper focuses on the formation, evolution and stability of the distribution of preferences in the population and its relationship with the investment and bargaining strategies in a simplified hold up problem. More precisely, in our model a population of infinitely-lived players (say, for example, firms) with homogeneous selfish or self-regarding preferences is pair-wise matched at each period with a population of an equal size of short-lived players (say, for example, workers) with heterogeneous preferences. Both types of player play a two-stage game. In the first stage, they decide separately but simultaneously whether to make a general or a relation-specific investment. The latter ty…