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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

The Role of Temporary Disputes in Solving the Hold-up Problem

Vol.22, No.1, March , 28–57



  •   (Department of Economics, Konkuk University)

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Abstract  

The paper shows that allowing a simple choice such as initiating temporary disputes can cure the holdup problem. This is despite that the specific investments are two-sided, and the nature of the investment is cooperative, the case in which the hold-up problem is the most difficult to overcome. It is because the ``dispute'' option generates multiple equilibria for the ex post renegotiation game, and they can be conditioned to enforce efficient investments.


Keywords
   Hold-up problem, Incomplete Contracts, Temporary Disputes

JEL classification codes
   D23
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