Competition and the hold?up problem: a setting with non?exclusive contracts
This article o?ers a solution to the “hold-up” problem in a bilateral investment game. Without the existence of a centralized grand-contract, a buyer signs non-exclusive contracts with many sellers, and the equilibrium investment profile depends on the level of competition in the trading outcome. I a common agency game where both sides of the market undertake investment, full eciency is only implemented when the trading outcome is the most competitive. Due to the strategic complementarity of investments, payo?s are generally not monotone with the bargaining position, and lower competitive outcomes may generate larger aggregate surpluses.
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