The Hold-Up Problem and Communication: Experimental Evidence

Felix Meickmann and Patrick W. Schmitz

No 22013, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The hold-up problem plays a central role in organizational and institutional economics. According to standard theory, an investor may have insufficient incentives to invest in a relationship with a trading partner when the investor anticipates that in future negotiations the trading partner might behave opportunistically, so the investor's costs might not be recouped. In a prominent paper-and-pencil experiment, Ellingsen and Johannesson (2004a) have shown that communication can mitigate the hold-up problem. They allow either the investor or the trading partner to send a single text message to the other player. In order to study the robustness of their findings, we replicate their setup in an online experiment, allowing for a larger number of observations and a different subject pool. Moreover, we extend the original setup by adding a treatment with bilateral communication in order to find out whether or not the possibility of arguing back and forth can further alleviate the hold-up problem.

JEL-codes: C72 C91 D23 D86 L14 (search for similar items in EconPapers)
Date: 2026-10
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