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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society
The Role of Temporary Disputes in Solving the Hold-up Problem
Vol.22, No.1, March 2011, 28–57
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Namhoon Kwon
(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.
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Keywords
Hold-up problem, Incomplete Contracts, Temporary Disputes |
JEL classification codes
D23 |
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