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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

2 Issues per year


IMPACT FACTOR 2016: 0.229
5-year IMPACT FACTOR: 0.271

CiteScore 2016: 0.30

SCImago Journal Rank (SJR) 2016: 0.398
Source Normalized Impact per Paper (SNIP) 2016: 0.232

Mathematical Citation Quotient (MCQ) 2016: 0.08

Online
ISSN
1935-1704
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Bilateral Trade and Opportunism in a Matching Market

Garey Ramey / Joel Watson
Published Online: 2001-11-06 | DOI: https://doi.org/10.2202/1534-5971.1030

We develop a model of bilateral contracting in a dynamic market setting. Asset owners must be paired via a matching process in order to form productive relationships involving long-term investments and ongoing effort. Market frictions shape the owners' incentives to invest in the absence of complete contracts. We identify cases in which there exists an optimal positive level of market friction implementing first-best investment levels. We also endogenize the choice between integrated and nonintegrated organizational forms. Changes in structural variables can induce crashes by disrupting existing relationships.

Keywords: contracting; specific investment; matching friction; self-enforcement

About the article

Published Online: 2001-11-06


Citation Information: Contributions in Theoretical Economics, Volume 1, Issue 1, ISSN (Online) 1534-5971, DOI: https://doi.org/10.2202/1534-5971.1030.

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