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AUTHOR:
Urs Schweizer
TITLE:
Cooperative Investments Induced by Contract Law
SUGGESTED CITATION:
Urs Schweizer
(2003)
"Cooperative Investments Induced by Contract Law",
German Working Papers in Law and Economics:
Vol. 2003:
Article 25.
http://www.bepress.com/gwp/default/vol2003/iss1/art25
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ABSTRACT:
This paper revisits the economic analysis of contract law for a setting
of cooperative investments. While Che and Chung (1999) have
shown that expectation damages perform rather poorly, the present
paper argues that this negative result follows from their impicit assumption
of unilateral expectation damages. Yet, the very nature of
cooperative investments gives rise to the possibility that both parties
may claim expectation damages. It is shown that such a regime
of bilateral expectation damages provides the incentives for the first
best solution even in a framework of binary choice where, for selfish
investments, the traditional overreliance result would hold.
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