Incomplete Contract, Transaction-Specific Investment, and Bargaining Power

  • Moriki HosoeEmail author


In this paper, after reviewing the basic concepts of incomplete contract, we conduct a fundamental analysis of the transaction mechanism, focusing on the role of bargaining power and transaction-specific investment. When one considers a basic pattern of market transaction (one-to-one and buyer-to-seller transaction), one finds that two important questions—what information who holds and who holds bargaining power—have an extremely important influence on the model and the outcome of the transaction. Moreover, the effectiveness of bargaining power depends on various factors related to the environment in which the transaction occurs (e.g. the existence of external options, the structure of information possession, and so forth).


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© Springer Nature Singapore Pte Ltd. 2020

Authors and Affiliations

  1. 1.Emeritus ProfessorKyushu UniversityFukuoka cityJapan

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