The Hold-up Problem

Yeon-Koo Che () and Jozsef Sakovics ()

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: Hold-up arises when part of the return on an agent’s relationship-specific investments is ex post expropriable by his trading partner. The hold-up problem has played an important role as a foundation of modern contract and organization theory, as the associated inefficiencies have justified many prominent organizational and contractual practices. We formally describe the main inefficiency hypothesis and sketch out the remedies suggested, as well as the more recent re-examination of the relevance of these theories.

Date: 2006-03
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:142

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