Asset Specificity and the Hold-Up Problem – Lessons to Learn from Transaction Cost Economics
10 Pages Posted: 9 Jun 2011
Date Written: June 8, 2011
At the very centre of this working paper is the notion of asset specificity. I will therefore first of all introduce this concept (infra I.1.) and give a real-world example (infra I.2.). This will be followed by an illustration of the positive and negative ramifications of asset specificity (infra II.), focusing in particular on post-contractual opportunism and the hold-up problem (infra II.1.). The subsequent part of the paper deals with the question, whether the hold-up problem necessarily requires a threat of opportunistic behaviour by one party (infra III.). Then, I will focus on the issue which forms of economic organization the transactors can use to overcome the problem (infra IV.) before I will finish with some concluding remarks (infra V.).
Keywords: Asset Specificity, Hold-up, Opportunistic Behaviour
JEL Classification: D23
Suggested Citation: Suggested Citation