American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Contracting with Third Parties
American Economic Journal: Microeconomics
vol. 1,
no. 1, February 2009
(pp. 75–100)
Abstract
In bilateral holdup and moral hazard in teams models, introducing a third party allows implementation of the first best, even if renegotiation is possible. Fines paid to the third party provide incentives for truth-telling and investment. This result holds even if the third party is corruptible, as long as the grand coalition has access to the same contracting technology as any colluding subcoalition. (JEL D86, D82)Citation
Baliga, Sandeep, and Tomas Sjöström. 2009. "Contracting with Third Parties." American Economic Journal: Microeconomics, 1 (1): 75–100. DOI: 10.1257/mic.1.1.75JEL Classification
- D82 Asymmetric and Private Information
- D86 Economics of Contract: Theory
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