Excerpt from Overinvestment With Relation-Specific Capital<br><br>We consider a situation in which one party (the owner) owns a project. He is better informed than another party (the worker) about the payoff this project would have if investment specific to their relationship is undertaken. Initially many workers compote to be the owner's partner in the project. If the investment is undertaken the worker gains knowledge which makes him worth more than other workers and which allows him to capture some of the payoffs of the project. We show that the equilibrium contract generally involves overinvestment. We consider both the case in which the owner can credibly commit never to undertake the project with a different worker and the case in which he can't. In the former case there is always overinvestment. In the latter case, there are multiple equilibria. Overinvestment equilibria always exist, underinvestment equilibria never exist and efficient equilibria sometimes exist.<br><br>About the Publisher<br><br>Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com<br><br>This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.