Vertical integration is often proposed as a way to resolve hold-up problems, ignoring the empirical fact that division managers tend to maximize divisional (not firmwide) profit when investing. This paper develops a model with asymmetric information at the bargaining stage and investment returns taking the form of cash and “empire benefits.” Owners of a vertically integrated firm then will prov...

In an environment in which both buyers and sellers can undertake match specific investments, the presence of market competition for matches may solve hold-up and coordination problems generated by the absence of complete contingent contracts. In particular, this paper shows that when matching is assortative and sellers‘ investments precede market competition then investments are constrained eff...

We examine situations in which a party must make a sunk investment prior to contracting with a second party to purchase an essential complementary input. We study how the resulting hold-up problem is affected by the seller’s information about the investing party’s likely returns from its investment. Our principal focus is on the effects of the investment’s being observable by the non-investing ...

xs one of ten regional umts mandated by Congress and ostabhshed in Fall 1988 to support research, educatSon, and training m surface transportation. The UC Center serves federal Regmn IX and is supported by matehmg grants from the U.S. r~epart-merit of Transportafit~;~, the Califomm Department of Transportatlon (Caltra~), and the Universlty. Based on the Berkeley Campus, UCTC draws upon exlstmg ...