Hold-up: With a vengeance

Martin Dufwenberg, Alec Smith, Matt Van Essen

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

When contracts are incomplete or unenforceable, inefficient levels of investment may occur because of hold-up. If individuals care for negative reciprocity, these problems may be reduced, as revenge becomes a credible threat. However, negative reciprocity has this effect only when the investor holds the rights of control of the investment proceeds. We explore this issue analytically, deriving predictions for hold-up games which differ as regards assignment of rights of control. We also test and support these predictions in an experiment.

Original languageEnglish (US)
Pages (from-to)896-908
Number of pages13
JournalEconomic Inquiry
Volume51
Issue number1
DOIs
StatePublished - Jan 1 2013

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ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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