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Does competition solve the hold-up problem?

Abstract:

In an environment in which heterogeneous buyers and sellers undertake ex ante investments, the presence of market competition for matches provides incentives for investment but may leave inefficiencies, namely hold‐up and coordination problems. This paper shows, using an explicitly non‐cooperative model, that when matching is assortative and investments precede market competition, buyers' investments are constrained efficient while sellers marginally underinvest with respect to what would be ...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1111/ecca.12170

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Role:
Author
Publisher:
Wiley
Journal:
Economica More from this journal
Volume:
83
Issue:
329
Pages:
172-200
Publication date:
2015-11-28
DOI:
ISSN:
1468-0335
Keywords:
Pubs id:
pubs:572763
UUID:
uuid:ab988e13-b418-43de-b381-e74ebb3cf62f
Local pid:
pubs:572763
Source identifiers:
572763
Deposit date:
2015-11-12

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