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Connor Thomas Ms. Biesiada ENGL 106 15 November 2013 1. Hausch, Donald B, Yeon-Koo Che. Cooperative Investments and the Value of Contracting. The American Economic Review 89:1 (Mar, 1999): 125-147. Print. This article written by Donald B. Hausch and Yeon-Koo Che for the American Economic Review will be more than important for my research. This chapter of the American Economic Review describes the benefits to two parties when involved in a cooperative investment rather than selfish investments. This article gives an abundance of examples as to why this is true and as to why selfish investments and incomplete contracts dont provide for optimal return on investments. The chapter is also relevant to my own personal studies as I plan on either majoring in Economics or Finance at Purdue. This will be the main article I reference throughout this paper. 2. Move 1: Our interest is in cooperative investments that generate a direct benefit for the

trading partner. A cooperative investment is pure if it offers no (negative) accompanying direct benefits to the investor, and it is hybrid if it offers direct benefits to both parties, i.e., has both cooperative and selfish elements, (Hausch and Koo-Che 126). Yeon-Koo Che and Donald Hausch use this portion of the essay in order to define what they plan on analyzing for the remainder of the chapter. When saying the words, Our interest at the beginning of the move it allows the reader to understand what the authors plan on concentrating the chapter on along with defining their main message for the reader. Move 2: First, regardless of the degree to which the investments are cooperative, efficiency can be realized if the parties credibly commit not to renegotiate their contract. Our second and more important result treats the case in which a commitment not to renegotiate is

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impossible for the parties. ..If investments are sufficiently cooperative, then there exists an intermediate range of bargaining shares for which contracting has no value. ..Lastly, even if the cooperative nature of the investments is sufficiently weak that contracting has value, an efficient outcome may not be possible (127). This statements job to the reader, if read sufficiently and with depth, will allow the reader to determine what the authors final conclusions and opinions are about the subject. It also works to move the essay along because now, this statement can work as a thesis and the remainder of the essay will be able to be organized in order to support this statement. Move 3: The holdup problem has led many authors to propose various organizational interventions as remedies, including vertical integration (Benjamin Klein et al., 1978; Williamson, 1979), exchanging hostages (Williamson, 1983), shifting property rights (Sanford Grossman and Hart, 1986; Hart and Moore 1990), allocating control rights (Philipee Aghion and Patrick Bolton, 1992), and designing an authority relationship (Aghion and Tirole, 1997). When stating this sentence towards the beginning of the chapter, this opened up the opportunity for the authors to refute previous theories and claims with respect to cooperative contracts. By stating previous theories, this gives validity to the chapter because the chapter is talking about new information that hasnt been studied to the depth that it is in the chapter of the American Economic Review. It also gives the chapter a purpose, if someone has already made a parallel claim on the subject, there would be no purpose for the analyzing done in this chapter. Recently, however, the incomplete contracting paradigm has been challenged by several authors who argue that simple (incomplete) contracts can solve the holdup problem, (125). This chapter in the American Economic Review follows the CARS model precisely. Although neither author comes out and states each move clearly, when examined closely, the

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moves are quite evident. Furthermore, this article doesnt follow the CARS model in order. For example, Move 2 doesnt appear until near the end of the introduction as opposed to Move 3 that was the first move cited in this article.

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Throughout reading this article, the authors style was very apparent. Time and time

again the author would state a claim or position, then confirm it with a multitude of examples. For example, Cooperative investments are critically important in modern manufacturing, where the adoption of quick-response inventory systems and flexible manufacturing approaches has increased the need for coordination across different production stagesToshihiro Nishiguchi (1994 p. 138) reports that suppliers send engineers to work with [automakers] in design and production. They play innovation roles in gathering information about [the automakers] long-term product strategies. This is just one of many examples where the authors will make a claim, then support that claim with a multitude of real practical examples. The tone of this essay was one can infer as educational and advanced. Although necessary, I often found the authors using a lexis only educated members of their field would understand. For example, Other common examples of cooperative investments include qualityenhancing R & D efforts by suppliers and workers simply paying attention to their jobs, (127). When a relatively uneducated person reads a sentence like that, they ask themselves, Whats R & D? Only members within the Economics/Finance discourse community would have an idea what this statement means. Knowing the authors were comfortable enough to abbreviate a term in a formal report means majority of educated members of their field understand it, but not the outsiders like myself. It is also obvious the chapter and books intended audience is not one like myself, but people within the Economics/Finance field due to the

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vocabulary used and simply the title of the chapter and book. Furthermore, these authors like to boast their own vocabulary with usage of such words as, idiosyncratic. The organization of this paper is set up in a format conducive for the educated reader. After a 4-5 page introduction and stating the overall point of the article as the very beginning in italics, makes up the beginning of the report. Followed by the introduction is a set of sections that elaborate on how they came to their multiple conclusions. The elaboration includes many complex formulas, graphs, and assumptions that only educated people in economics would understand. The style, organization, format, and tone tell the reader many things about this article. Throughout examining the personalities of this article, it is clear to the reader what theyre getting into when attempting to read a complex article like this one. These personalities show who the article is intended for along with its intent.