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Information control in the hold‐up problem
Author(s) -
Nguyen Anh,
Tan Teck Yong
Publication year - 2019
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12295
Subject(s) - inefficiency , ex ante , incentive , information asymmetry , investment (military) , control (management) , economics , microeconomics , welfare , private information retrieval , computer science , macroeconomics , computer security , market economy , management , politics , political science , law
We study the use of information control to mitigate hold‐up risks. We identify a distinction between asymmetric information that creates an ex ante investment incentive and asymmetric information that causes ex post inefficiency , which then allows ex post inefficiency to be eliminated without compromising the ex ante investment incentive. We characterize the properties of the optimal information structure and the payoffs and welfare achievable with information control in the presence of hold‐up risks.