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Is There a Hold‐up Problem?
Author(s) -
Ellingsen Tore,
Johannesson Magnus
Publication year - 2004
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.0347-0520.2004.00373.x
Subject(s) - coordination game , investment (military) , economics , bargaining problem , microeconomics , nash equilibrium , law , politics , political science
We report on a hold‐up experiment in which unilateral investment is followed by bilateral bargaining according to Nash’s demand game. Without communication, investment is low and coordination is poor. Unilateral communication facilitates coordination, but not perfectly. Successful coordination predominantly entails “fair” outcomes. Perhaps surprisingly, sellers (investors) do at least as well under buyer communication as under seller communication.