Asset Specificity and the Hold-Up Problem – Lessons to Learn from Transaction Cost Economics

10 Pages Posted: 9 Jun 2011

See all articles by Julian Alexander Sanner

Julian Alexander Sanner

Max Planck Institute for Comparative and International Private Law

Date Written: June 8, 2011

Abstract

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

Sanner, Julian Alexander, Asset Specificity and the Hold-Up Problem – Lessons to Learn from Transaction Cost Economics (June 8, 2011). Available at SSRN: https://ssrn.com/abstract=1860210 or http://dx.doi.org/10.2139/ssrn.1860210

Julian Alexander Sanner (Contact Author)

Max Planck Institute for Comparative and International Private Law ( email )

Mittelweg 187
Hamburg, D-20148
Germany

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