Abstract
We consider a dynamic trade relationship where quality is not contractible and potential sellers retain quality-relevant private information. We show that the presence of an investment technology to improve the incumbent seller’s innate quality may impair the efficiency of the screening process. If the conflict is effective, the buyer has to induce an inefficient screening process or reduce the productivity of the investment technology. This conflict suggests that the hold-up problem may be more severe than predicted by models of incomplete contracts that assume complete information.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
