Collective Hold-Up

Matias Iaryczower and Santiago Oliveros

No 29984, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider dynamic processes of coalition formation in which a principal bargains sequentially with a group of agents. This problem is at the core of a variety of applications in economics and politics, including a lobbyist seeking to pass a bill, an entrepreneur setting up a start-up, or a firm seeking the approval of corrupt bureaucrats. We show that when the principal’s willingness to pay is high, strengthening the bargaining position of the agents generates delay and reduces agents’ welfare. This occurs in spite of the lack of informational asymmetries or discriminatory offers. When this collective action problem is severe enough, agents prefer to give up considerable bargaining power in favor of the principal.

JEL-codes: C78 D7 D71 D72 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-ind, nep-mic and nep-reg
Note: IO POL
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