Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7359875 | Journal of Economic Theory | 2014 | 26 Pages |
Abstract
Consider a seller who can make an observable but non-contractible investment to improve an intermediate good that is specialized to a particular buyerʼs needs. The buyer then makes a take-it-or-leave-it offer to the seller. The seller has private information about the fraction of the ex post surplus that he can realize on his own. Compared to a situation with complete information, additional investment incentives are generated by the sellerʼs desire to pretend a strong outside option. On the other hand, ex post efficiency is not attained since asymmetric information at the bargaining stage sometimes leads to inefficient separations.
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Authors
Susanne Goldlücke, Patrick W. Schmitz,