Contractual Solutions to the Hold-Up Problem

This paper considers a general version of the hold-up problem where n agents first make relation-specific investments and then must agree on some collective action. It is shown that first-best solutions exist under a variety of different assumptions about the nature of information asymmetries.

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Bibliographic Details
Published in:The Review of economic studies 1992-10, Vol.59 (4), p.777-793
Main Author: Rogerson, William P.
Format: Article
Language:English
Subjects:
Contracts
Dominant strategy
Investment decisions
Investment strategies
Mathematical vectors
Nash equilibrium
Public investments
Social choice
Transfer functions
Utility functions
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Description
Summary:This paper considers a general version of the hold-up problem where n agents first make relation-specific investments and then must agree on some collective action. It is shown that first-best solutions exist under a variety of different assumptions about the nature of information asymmetries.
ISSN:0034-6527
1467-937X
DOI:10.2307/2297997