Abstract

http://ssrn.com/abstract=277910
 
 

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Holdup and the Evolution of Bargaining Conventions


Herbert Dawid


Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

W. Bentley MacLeod


Columbia University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

2001

USC CLEO Research Paper No. C01-2; and USC Law and Economics Research Paper No. 01-14

Abstract:     
As Posner (1997) has observed, when individuals in a relationship can commit to imposing costs upon each other then efficient behavior in the absence of law is possible. The question is whether efficient norms of behavior evolve endogenously in a population. We show that in a standard hold up model in which both parties make relationship specific investments the long run outcome of a stochastic adaptation process similar to Young's (1993) 'adaptive play' does not in general correspond to the efficient equilibria. As Grossman and Hart (1986) observe, institutions, such as firms, may be needed to improve the allocation of resources.

Number of Pages in PDF File: 25

Keywords: Hold up problem, bargaining, evolution

JEL Classification: C78, L41

working papers series





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Date posted: July 28, 2001  

Suggested Citation

Dawid, Herbert and MacLeod, W. Bentley, Holdup and the Evolution of Bargaining Conventions (2001). USC CLEO Research Paper No. C01-2; and USC Law and Economics Research Paper No. 01-14. Available at SSRN: http://ssrn.com/abstract=277910 or http://dx.doi.org/10.2139/ssrn.277910

Contact Information

Herbert Dawid
Bielefeld University - Department of Business Administration and Economics ( email )
P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)
Center for Mathematical Economics ( email )
Postfach 10 01 31
Bielefeld, D-33501
Germany
William Bentley MacLeod (Contact Author)
Columbia University - Department of Economics ( email )
420 W. 118th Street
New York, NY 10027
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
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