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American Economic Journal: Microeconomics: Vol. 1 No. 1 (February 2009)
AEJ: Micro Volume. 1, Issue 1 | 
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AEJ: Micro Forthcoming Articles
Contracting with Third Parties
Article Citation
Baliga, Sandeep, and
Tomas Sjöström. 2009. "Contracting with Third Parties."
American Economic Journal: Microeconomics,
1(1): 75-100.
DOI: 10.1257/mic.1.1.75
DOI: 10.1257/mic.1.1.75
Abstract
In bilateral holdup and moral hazard in teams models, introducing
a third party allows implementation of the first best, even if renegotiation
is possible. Fines paid to the third party provide incentives
for truth-telling and investment. This result holds even if the third
party is corruptible, as long as the grand coalition has access to
the same contracting technology as any colluding subcoalition. (JEL
D86, D82)
Article Full-Text Access
Full-text Article
Authors
Baliga, Sandeep (Northwestern U)
Sjöström, Tomas (Rutgers U)
Sjöström, Tomas (Rutgers U)
JEL Classifications
D82: Asymmetric and Private Information
D86: Economics of Contract: Theory
D86: Economics of Contract: Theory
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