Premium
WHY HOLD‐UPS OCCUR: THE SELF‐ENFORCING RANGE OF CONTRACTUAL RELATIONSHIPS
Author(s) -
Klein Benjamin
Publication year - 1996
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1996.tb01388.x
Subject(s) - enforcement , opportunism , moral hazard , microeconomics , capital (architecture) , economics , business , law and economics , industrial organization , incentive , market economy , law , political science , archaeology , history
Court enforcement and private enforcement are not alternative contract enforcement mechanisms, but are used jointly by transactors to define the self‐enforcing range of a contractual relationship. Within this framework contract terms economize on the limited amounts of private enforcement capital possessed by transactors, either by directly controlling transactor behavior or by shifting private enforcement capital between transactors to coincide with likely future market conditions. Hold‐ups occur when market conditions change sufficiently to place the relationship outside the self‐enforcing range. This probabilistic view of hold‐ups is contrasted with opportunism more generally and with moral hazard behavior.