Jump to ContentJump to Main Navigation
Show Summary Details
More options …

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 2017: 0.220
5-year IMPACT FACTOR: 0.328

CiteScore 2017: 0.28

SCImago Journal Rank (SJR) 2017: 0.181
Source Normalized Impact per Paper (SNIP) 2017: 0.459

Mathematical Citation Quotient (MCQ) 2017: 0.09

Online
ISSN
1935-1704
See all formats and pricing
More options …

Inefficiency in a Bilateral Trading Problem with Cooperative Investment

Kazumi Hori
Published Online: 2006-07-11 | DOI: https://doi.org/10.2202/1534-5971.1248

A bilateral trading model with investment is considered. In a “cooperative” investment version of the model, the seller's investment stochastically determines the buyer's valuation of the good. The value and cost of the good are realized only after the investment is made, and the investment level and the realization of the good's value and cost are private information. I show that, under these assumptions, no contract made before the investment can simultaneously induce efficient investment and efficient ex post trade when the buyer's type is continuously distributed. This inefficiency result contrasts sharply with the efficiency result under the standard “selfish” investment model, where the seller's investment stochastically determines the seller's cost.

Keywords: bilateral trading; cooperative investment; contracts

About the article

Published Online: 2006-07-11


Citation Information: Contributions in Theoretical Economics, Volume 6, Issue 1, Pages 1–9, ISSN (Online) 1534-5971, DOI: https://doi.org/10.2202/1534-5971.1248.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in