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Hallo,
i am enrolled in a law-and-economics course which deals with breach of contract.
1. i have the following model:
buyer B with valuation v and reliance investment I and seller S, some third party E with valuation of the good θ and θ's distribution F(θ) and density F'(θ).
Q: What does F(θ) and F'(θ) mean? how do they look graphically?
2. first-best (social planner's choice) vs. expectation damages:
first-order condition for social planner is: (1) v ' (I^{F}) * F (v(I^{F})) = 1
I^{F} is reliance investment superscript F (F for first-best)
first-order condition under expectation rule: (2) v' (I^{ED} = 1
Q: Why is curve (2) above the curve (1). after all that means, that there is over-investment under expectation damages. the intuition behind is not clear for me. can somebody explain in words?
thanks in advance.
i am enrolled in a law-and-economics course which deals with breach of contract.
1. i have the following model:
buyer B with valuation v and reliance investment I and seller S, some third party E with valuation of the good θ and θ's distribution F(θ) and density F'(θ).
Q: What does F(θ) and F'(θ) mean? how do they look graphically?
2. first-best (social planner's choice) vs. expectation damages:
first-order condition for social planner is: (1) v ' (I^{F}) * F (v(I^{F})) = 1
I^{F} is reliance investment superscript F (F for first-best)
first-order condition under expectation rule: (2) v' (I^{ED} = 1
Q: Why is curve (2) above the curve (1). after all that means, that there is over-investment under expectation damages. the intuition behind is not clear for me. can somebody explain in words?
thanks in advance.
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Hi there,
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While you're waiting for an answer, did you know we have 300,000 study resources that could answer your question in TSR's Learn together section?
We have everything from Teacher Marked Essays to Mindmaps and Quizzes to help you with your work. Take a look around.
If you're stuck on how to get started, try creating some resources. It's free to do and can help breakdown tough topics into manageable chunks. Get creating now.
Thanks!
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