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A solution to the hold-up problem involving gradual investment

Pitchford, Rohan ; Snyder, Christopher M.

Journal of economic theory, 2004, Vol.114 (1), p.88-103 [Periódico revisado por pares]

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Título:
A solution to the hold-up problem involving gradual investment
Autor: Pitchford, Rohan ; Snyder, Christopher M.
Assuntos: Contribution games ; Economic models ; Economic theory ; Game theory ; Gradualism ; Hold-up problem ; Incomplete contracts ; Investment ; Studies
É parte de: Journal of economic theory, 2004, Vol.114 (1), p.88-103
Descrição: We consider a setting in which the buyer's ability to hold up a seller's investment is so severe that there is no investment in equilibrium of the static game typically analyzed. We show that there exists an equilibrium of a related dynamic game generating positive investment. The seller makes a sequence of gradually smaller investments, each repaid by the buyer under the threat of losing further seller investment. As modeled frictions converge to zero, the equilibrium outcome converges to the first best. We draw connections between our work and the growing literature on gradualism in public good contribution games and bargaining games.
Editor: New York: Elsevier Inc
Idioma: Inglês

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