Logo Logo

Contracting with Third Parties, American Economic Journal: Microeconomics

Abstract

In the bilateral hold-up model and the moral hazard in teams model, introducing a third party allows implementation of the first-best outcome, even if the agents can renegotiate inefficient outcomes and collude. Fines paid to the third party provide incentives for truth-telling and first-best levels of investment. Our results suggest that models that provide foundations for hold-up and incomplete contracts by invoking renegotiation are sensitive to the introduction of third parties.

Type

Article

Author(s)

Sandeep Baliga, Tomas Sjostrom

Date Published

2009

Citations

Baliga, Sandeep, and Tomas Sjostrom. 2009. Contracting with Third Parties. American Economic Journal: Microeconomics. 1(1): 75-100.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more