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The «delay» of specific investments as the temporal analogue of underinvestment

The «delay» of specific investments as the temporal analogue of underinvestment

Journal of Institutional studies, , Vol. 7 (no. 3),

The paper attempts to draw parallels between underinvestment to specific assets and its "temporary" modification, which may be denoted as "delay". It discusses possible reasons and consequences of delay in the implementation of specific investments and considers the two variants of delay depending on whether the time of investment observed by the parties of the transaction. It shown that the basic model of underinvestment, which can be used when building the temporary version if unobserved investment, can be used the model of O. Hart, while the analysis of the delay in the observability of investment hasn’t direct analogues and requires the usage of the theory of games with incomplete information.

Keywords: specific investments; underinvestment; delay.

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