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Cooperative Investments and the Value of Contracting
Abstract
Recent articles have shown that contracts can support the efficient outcome for bilateral trade, even in the face of specific investments and incomplete contracting. These studies typically considered “selfish” investments that benefit the investor (e.g., the seller's investment reduces her production costs). We find very different results for “cooperative” investments that directly benefit the investor's partner (e.g., the seller's investment improves the buyer's value of the good). Most importantly, if committing not to renegotiate the contract is impossible, then contracting has no value, i.e., the parties cannot do better than to abandon contracting altogether in favor of ex post negotiation. (JEL C70, J41, K12, L22)
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Citations
Cited by
Formal and Informal Contracting: Theory and Evidence
Gil, R., & Zanarone, G. (2017) · Annual Review of Law and Social Science · doi:10.1146/annurev-lawsocsci-110316-113413 · Cited by 56
Metadata
- Authors
- Che, Y.-K., & Hausch, D. B.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 1999-03-01
- Volume
- 89
- Issue
- 1
- Pages
- 125-147
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2093502187
- Cited by
- 495
- References
- 0
- FWCI
- 54.05
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Cooperative Investments and the Value of Contracting. https://app.cochat.ai/papers/10.1257/aer.89.1.125
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- Che, Y.-K., & Hausch, D. B. (1999). Cooperative Investments and the Value of Contracting. American Economic Review. https://doi.org/10.1257/aer.89.1.125
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
