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Efficiency and Stability of Relationships with Local Altruistic Commitment

  • Ottorino Chillemi
  • Benedetto Gui
Chapter
Part of the International Economic Association Series book series (IEA)

Abstract

Continuing interaction with the same partners may ensure greater joint surplus than switching to new partners. When this is so, one can say that past history has led to the accumulation of relation-specific assets, and economic analysis of the relationship boils down to studying the creation and exploitation of such assets. Indeed, bargaining costs may dissipate part of their potential returns, and correspondingly reduce the value of the assets themselves. Furthermore, in an ex ante perspective, investment costs are also to be accounted for, so surplus maximization is subject to even stricter individual incentive compatibility constraints.

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Copyright information

© International Economic Association 2000

Authors and Affiliations

  • Ottorino Chillemi
    • 1
  • Benedetto Gui
    • 1
  1. 1.University of PaduaItaly

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