Top PDF Breach Remedies, Performance Excuses, and Investment Incentives

Breach Remedies, Performance Excuses, and Investment Incentives

Breach Remedies, Performance Excuses, and Investment Incentives

generates over-reliance though less so than expectation damages. Combining breach remedies with performance excuses will further affect investment incentives. From an economic perspective, two issues at least are at stake. Posner and Rosenfield (1977) suggest that discharge should be allowed where the promisor is the superior risk bearer. But they also mention the potential use of the impossibility doctrine to optimize reliance incentives. If courts discharge the promisor just in those cases where the promisee has behaved suboptimally such a legal practice would affect reliance incentives indeed. Notice, implementing the scheme under this interpretation of the doctrine would require courts to monitor efficient reliance investments of the promisee.
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Breach Remedies Including Hybrid Investments

Breach Remedies Including Hybrid Investments

point: He considers a setting where the seller makes selfish investments. In the absence of a contract, there will be underinvestment due to the hold-up problem. If, however, the contract stipulates the highest possible quality/quantity, and it is the buyer who breaches the contract, the seller will overinvest. This is because he is fully insured and fails to take into account the states of the world where it is inefficient to trade (This is a version of the ‘overreliance’ result by Shavell (1984) who implictly assumes Cadillac contracts by modelling the trade decision as binary). To solve this problem, Edlin (1996) proposes to set the price so low, that it will always be the investing seller who breaches the contract. That makes him the residual claimant and provides him with efficient investment incentives. Yet, in order to make the seller accept a contract with such a low price, the buyer has to pay the seller a lump sum up front. By contrast, in our model, we are concerned with hybrid investments and need not rely on any up-front payments.
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Standard Breach Remedies, Quality Thresholds, and Cooperative Investments

Standard Breach Remedies, Quality Thresholds, and Cooperative Investments

Our paper makes the following three points: 1) The existing default legal regime of common law, expectation damages, is already able to induce first-best cooperative in- vestments. Hence, there is no urgent need for privately stipulated remedies in order to induce cooperative investments. 2) If the contracting parties doubt whether the court possesses enough information to apply expectation damages, they can create legal reme- dies of their own. Che and Chung (1999) suggest that they use reliance damages. We argue that, in some cases, it is easier for courts to verify whether the buyer’s valuation ex- ceeds some well-chosen quality threshold than to verify the absolute value of the seller’s investment. Then, parties should prefer a regime combining specific performance and restitution (SPR) over reliance damages. 3) In order to apply the SPR regime, no more information needs to be verifiable than is implicitly assumed in Che and Hausch (1999). Moreover, papers by Chung (1991), Aghion, Dewatripont, and Rey (1994) and Edlin and Reichelstein (1996) have already argued that the specific performance remedy per- 21 See expression (14). We owe the insight of this last paragraph to discussions with Patrick Schmitz
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Efficient Breach, Reliance and Contract Remedies at the WTO

Efficient Breach, Reliance and Contract Remedies at the WTO

plaintiff may recover for expenses to which he is put in preparation of his performance. 86 The ability of private third parties to recover ascertainable investment costs for this type of tortious interference with their exporting activities indirectly through the WTO is crucial given that not only are private claims directly against Members states forbidden at WTO, but some member countries have enacted statutes that specifically prohibit their courts from hearing claims against foreign sovereign states for damages resulting from interference with contract. 87 By channeling monetary damages through the winning Member state to their injured citizens through WTO dispute settlement remedies, such tort-like compensation for WTO violations addresses a significant gap in the law of international trade. This is not to suggest that private economic actors should be able to bring suit against states for the passing of any legislation that impairs their ability to conduct commercial activities, indeed almost any government action could warrant private litigation if that were the case. Rather the impugned government measure
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Invitations and excuses that are not invitations and  excuses: Gossip in Luke 14:18–20

Invitations and excuses that are not invitations and excuses: Gossip in Luke 14:18–20

This interpretation of the excuses, first of all, focuses on the content of the excuses, with a typically modern approach to true and false. The social dynamics at play in the parable, however, have less to do with the content of the excuses than with the reason(s) behind them. To be fair, some interpreters do refer to the same spirit and essence of the excuses, namely that it seems that the invitees did not want to go (see e.g. Kistemaker 1980:163; Lockyer 1963: 276–277; Morgan 1953:181–182; Schippers 1962:41; Scott 2001: 109–117). Yet, even if this were the case, the three excuses in the parable are not related to the deafening silence of the other invited guests. The question should not be why the three do not attend the feast, but why everybody turns down the invitation. Secondly, even when one focuses on the content of the three excuses in Luke 14:18–20, the stock interpretation given by most scholars should not simply be accepted on face value. Luke 14:18–20 does not suggest that a field was bought before any inspection, that the five yoke of oxen were not tested out earlier, or that a newly-wed all of a sudden forgot that he was getting married. 27 Again, this is
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When there is a breach of contract, the party not in default may claim 1 or more of the respective remedies.

When there is a breach of contract, the party not in default may claim 1 or more of the respective remedies.

Notwithstanding s.54(f) where a contract comprises an affirmative agreement to do a certain act, the circumstances that the Court is unable to compel Specific Performance of the affirmative agreement shall not preclude it from granting an Injunction to perform the negative agreement…..

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Net Neutrality and Investment Incentives

Net Neutrality and Investment Incentives

Re‡ecting the importance of the Internet as a main driver of economic growth and prosperity in the global economy, one of the main issues of the net neutrality debate is the innovation and investment incentive for various parties involved in the market. For instance, ISPs such as Verizon, Comcast, and AT&T oppose network neutrality regulations and claim that such regulations would discourage investment in broadband networks. The logic is that they would have no incentive to invest in network capacity unless content providers who support bandwidth-intensive multimedia Internet tra¢ c pay a premium. In contrast, proponents of network neutrality regulations (comprising mostly consumer rights groups and large Internet content companies such as Google, Yahoo, and eBay) note that the Internet has operated according to the non-discriminatory neutrality principle since its earliest days. They argue that net neutrality has been the main driver of the growth and innovative applications of the Internet. To support their claim, they rely on the so- called end-to-end design principle. Under this design principle, decisions are made “to allow the control and intelligence functions to reside largely with users at the ‘edges’of the network, rather than in the core of the network itself.” 5 According to them, this creates an environment that does not require users to seek permission from the network owners and thus promotes innovations in Internet applications.
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Investment incentives in auctions: An experiment

Investment incentives in auctions: An experiment

Our results yield several conclusions for public policy. Obviously, if investment prior to the auction is important or if positive synergies between auctions exist it is not immediately obvious whether first- or second-price auctions are better suited for public procurement. First- price auctions are typically easier understood by the subjects, yield low procurement cost (since bidders bid persistently more aggressively than predicted), and are less susceptible to collusion than second-price auctions. Second-price auctions, on the other hand, imply higher investment incentives. Thus, if improvement of production technolo- gies or process innovations are important, second-price auctions are likely the better choice. Our analysis (as many other experiments) demonstrates, however, that the second-price auction format has to be carefully chosen, as typically a large share of subjects do not easily understand the equilibrium strategy.
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Convertible Debt And Investment Incentives

Convertible Debt And Investment Incentives

However, when existing assets generate moderately high cash flow, convertible debt with a restrictive dividend constraint dilutes the shareholders' stake in the new investment and create[r]

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Tax Incentives and Equipment Investment

Tax Incentives and Equipment Investment

Equation 8 states that for a given piece of new equipment, a dollar spent on either an investment tax credit or a corporate rate reduction reduces the rental price of capital s[r]

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Crime, Culpability, and Excuses

Crime, Culpability, and Excuses

24 If choice is illusory, then the institution of punishment should give way to other institu- tions, institutions designed to deter, to reform, to rehabilitate, or to[r]

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Net Neutrality and Investment Incentives

Net Neutrality and Investment Incentives

With the adoption of such microfoundations in a setup with a monopolistic network operator and two application providers, we provide a formal economic analysis on the e¤ects of net neutrality regulation on investment incentives for Internet service providers (ISPs) and content providers (CPs), and their implications for social welfare. More speci…cally, we …rst compare the market equilibrium in which the monopolistic ISP is allowed to provide a two-tiered service by selling the "fast-lane" to only one content provider to the equilibrium in which it cannot discriminate the delivery speed of content. This comparison of short- run equilibrium yields two major …ndings. First, both content providers may engage in a Prisoners’dilemma type of game to receive the …rst priority in the delivery of content and be worse o¤ in a discriminatory network. The ISP’s decision of whether or not it will prefer the discriminatory regime to the neutral network depends on a potential trade-o¤ between its network access fee from end users and the revenue from CPs through the trade of the …rst-priority. Second, the short-run e¤ect of net neutrality regulation on social welfare depends on the relative magnitudes of content providers’cost/quality asymmetry and the degree of content di¤erentiation. In particular, we show that social welfare is higher under net neutrality if the asymmetry across content providers is su¢ ciently small.
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Investment Incentives in Procurement Auctions

Investment Incentives in Procurement Auctions

Finally, it is interesting to stress the fact that most of auction theory and, in particular, the comparison between market rules, take the distributions of private information as exogenously given. In practice, this should not be the case as market institutions are likely to a¤ect the incentives for entry and investment. In this paper, we have o¤ered a …rst comparison between the …rst price auction and the second price auction when …rms are not necessarily symmetric ex-ante, the distributions of costs are endogenous and investment is observable. Our analysis has highlighted two attractive features of the second price auction: (1) it generates higher investment levels than the commonly used …rst price auction and (2) these investment levels are socially e¢cient. These results suggest that in markets where investment prior to the auction is deemed important or where there exist positive synergies between auctions, the second price auction is likely to be better at fostering a healthy level of competition.
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Investment Incentives in Auctions: An Experiment

Investment Incentives in Auctions: An Experiment

Table 3 moreover summarizes the proportions of bids equal to observed cost +/- 1 %, and above and below, respectively. As table 3 shows, the percentage of bidders that behaved close to the theoretical prediction mildly increased over time. Still, more than half of the bidders over– or underbid their cost even in period 4, where the vast majority underbids their cost (i.e. runs the risk to incur a loss). Over all periods, we observe 8.9% of bids below 200, and an additional 24.76% of bids between 200 and 300 that were more than 10% below the corresponding cost. A large proportion of the extremely low bids (below 200 ptas.) was due to only three bidders. In addition the number of bids below 200 is dramatically higher in the case where an investment has been made. In this case there are 14.6 % firm 1– bids and 6.4 % firm 2–bids in this range. In the symmetric case (where no investment has been made) there are only 3 % bids by firm 1 players and 3.5 % bids by firm 2 players below 200. This difference might reflect more aggressive behavior in the asymmetric case, which is probably also largely due to individual effects.
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Remedies for non-performance 1

Remedies for non-performance 1

There are some remedies for a situation where the insurer breaches a policy. Obviously, the assured can claim the benefits of insurance and recover damages for any loss or damage suffered by him and based on the insurers' conduct. If the insurer or its representative, when marketing the insurance, failed to provide necessary information or gave incorrect or misleading information to the policyholder, the insurance contract is considered to apply as understood by the policyholder on the basis of the information he received (section 7, Insurance Contracts Act). This also applies where incomplete, incorrect or misleading information is given to the policyholder during the period of the insurance's validity and affects the policyholder's actions. It does not, however, apply to information given by the insurer or its representative on compensation or benefits payable after the occurrence of an insured event.
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Asset ownership and investment incentives revisited

Asset ownership and investment incentives revisited

Whether for good or ill, managers often have in‡uence well beyond their tenure in a job. Examples are so numerous as to be commonplace. Chandler (1977) recounts that the American railroad network took its modern form by the 1880s and ”...salaried career executives played a critical role in the system building of the 1880s” (p167). Irreversible investment decisions aside, a theme of Peters and Waterman (1982) is that e¤ective managers inculcate an enduring culture. Typical is the quote of Richard Deupree, former CEO of Procter and Gamble, ”William Procter and James Gamble realized that the interests of the organization and its employees were inseparable. That has never been forgotten.” (p76). This paper examines the implications of such persistence for the property rights theory of the …rm (PRT).
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'Insufficient Incentives for Investment in Electricity Generation’

'Insufficient Incentives for Investment in Electricity Generation’

competition is incompatible with long-term contracting for electricity. 2 If the above described reason or other constraints restrict long-term contracting, then the market cannot implement the first-best solution. This has three implications. First, consumer welfare is slightly reduced, because consumers cannot hedge electricity price risk. Secondly, investment in peaking capacity is only remunerated in times with generation scarcity, and hence faces volatile returns. Investors require higher rates of return, and postpone their investment until the expected electricity price is higher. Third annual price volatility also increases volatility of revenue streams for base load generation if sales are not covered by long-term contracts. This increases the required rate of return, capital costs and hence investors will choose less capital-intensive generating technologies, even if this creates higher fuel costs. A lack of long-term contracts biases technology choice against energy efficient technologies and might further increase costs of providing electricity.
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Information Aggregation, Investment, and Managerial Incentives

Information Aggregation, Investment, and Managerial Incentives

We find that compensation tied to share prices may enhance share overvaluation and induce excess volatility in investment, as managers try to cater investment policies to those traders who have the largest impact on market prices. Our model has two predictions that align with empirical evidence. First, it suggests that the value enhancing effects of market-specific information in guiding real investment depend im- portantly on the extent of informed trading activity. This fits the evidence provided by Chen, Goldstein and Jiang (2007) who study the impact of informed trading in the sensitivity of real investment to price changes. They find stronger investment sensitivity in firms whose shares are traded by more informed traders, as measured by PIN (probability of informed trading – Easley et al. (1996)). 14 Second, Polk and Sapienza (2009) provide support to our findings regarding the impact of stock-based compensation. They test a “catering” theory using discretionary accruals as a proxy for mispricing, 15 finding a positive relation between share overvaluation and excess investment after controlling for Tobin’s Q. This relation is stronger for firms with higher share turnover, which could proxy for traders’ short-term horizons. Moreover, they find that firms with high excess investment subsequently have low share returns, the more so the larger is their measure of mispricing. This suggests that such investment behavior is indeed inefficient.
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Sustainable Development Impacts of Investment Incentives

Sustainable Development Impacts of Investment Incentives

provide investors with higher and secured net returns. Secondly, investment incentives may promote efficiency if they increase activities with positive externalities, such as research and development (R&D) or training, beyond what the recipients would have done in the absence of the subsidy. Foreign direct investment (FDI) is a composite bundle of capital, know-how and technology. Its main contribution to growth is through the transfer and diffusion of technology, knowledge and skills in the countries attracting the FDI (Jensen, 2006). It is important to note that globalization also leads to an increasing number of locations that are inherently profitable for any given investment. Singapore has to cope with the trend of increasing competition among developing and industrialized countries for particular investments, particularly in the manufacturing sector. Through its incentives policy, Singapore is trying to differentiate itself in particular from other new emerging economies in the East/South Asian regional biomedical industry.
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Investment Incentives in Competitive Electricity Markets

Investment Incentives in Competitive Electricity Markets

In this study, the effect of investment incentives and different electricity markets has been examined on a generation capacity expansion criterion, as from a strategic GENCO perspective under uncertainties in a single year horizon, which is eligible for the electricity market above, such as: the energy only (EO), capacity payments (CP), firm contract (FC) and smart hybrid (SH) markets. In particular, the hybrid category is the market subjected to unique importance that includes the investment incentives of combining a co-existing capacity payment as well as a firm contract. Therefore, this is specifically considered in this study. For this purpose of consideration, the investment criterion solution is modelled as a bi-level steps’ optimization method, with the ease of expansion and adaptability to bi-level architectures, where the first and the second-level steps are related to investment problem (planning level) and operation problem (operation planning), respectively. The hierarchy of the method is divided into different levels. The first-level that includes decisions taken by a strategic GENCO who investigates installments of new generating unit in the future possible productions, in order to maximize the total profit in the planning horizon. In this criterion of markets, a strategic GENCO competes with non-strategic GENCOS (as rival GENCOs) both in investment and operation. The second-level models the above responses provided by a competitive fringe in terms of production bids, which are sorted by a market operator, who clears the market obtaining locational marginal prices (LMPs) as dual variables of the nodal balancing constraints. It is assumed here that the contractual revenues are paid to only new generating units, whereas the capacity payments are considered to be paid to all available units. In this model, demands are considered both as elastic and inelastic to price. In addition, all competitor uncertainties on offering and investment are modelled using different sets of scenarios. In addition, add-ons of reliability indicators are obtained for each year of the planning period in the proposed markets.
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