DP9065 Public goods and the hold-up problem under asymmetric information

Author(s): Patrick W. Schmitz
Publication Date: July 2012
Keyword(s): asymmetric information, incomplete contracts, investment incentives, public goods
JEL(s): D82, D86, H41
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9065

An agent can make an observable but non-contractible investment. A principal then offers to collaborate with the agent to provide a public good. Private information of the agent about his valuation may either decrease or increase his investment incentives, depending on whether he learns his type before or after the investment stage.