A Survey of the Hold-Up Problem in the Experimental Economics Literature

1 Pages Posted: 27 Jun 2018

See all articles by Yadi Yang

Yadi Yang

Tilburg Law and Economics Center (TILEC)

Date Written: June 27, 2018

Abstract

This paper reviews experimental studies on the so-called \hold-up problem". Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold-up problem, but to an extent less severe than what standard theory predicts. Hold-up occurs at the individual level, but exhibits a less severe pattern than theoretical predictions at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behaviors. Social preferences largely influence the results in hold-up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold-up problem. These fi ndings in the laboratory setting are also relevant in a real life hold-up situation e.g. in the standard-setting context, but differences in the specifi c institution and environment may require more variations in the experimental design.

Keywords: Hold-up problem, bargaining, social preferences

JEL Classification: L14, C78

Suggested Citation

Yang, Yadi, A Survey of the Hold-Up Problem in the Experimental Economics Literature (June 27, 2018). TILEC Discussion Paper No. 2018-024. Available at SSRN: https://ssrn.com/abstract=3203629 or http://dx.doi.org/10.2139/ssrn.3203629

Yadi Yang (Contact Author)

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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