Huihua NIE
October 2013
Economic Computation & Economic Cybernetics Studies & Research;2013, Vol. 47 Issue 4, p1
Academic Journal
By introducing asymmetric information of investors' abilities and finitely repeated games into the classic hold-up model, this paper revisits the relationship between property rights and reputation under incomplete contracting environment and obtains some different insights. First, even facing holdup agents can make efficient investments due to the reputation effect in some periods of relationship, which is sharply contrary to existing research. Second, although reputation is an incentive tool for agents, property rights are complementary or even necessary for reputation, and reputation itself is not enough to motivate agents to make first-best investments without ownership. Third, this paper explains underinvestment, efficient investment, and overinvestment in a unified dynamic model of property rights.


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