Holdup, Search and Inefficiency

Shingo Ishiguro

No 07-13, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper investigates the holdup problem in the dynamic search market where buyers and sellers search for their trading partners and specific investments are made after match but before trade. We show that frictionless (competitive) market imposes severe limitations on attainable efficiencies: Markets with small friction make the holdup problem more serious than those with large friction because in any equilibrium, whether stationary or non-stationary, investment must be dropped down to the minimum level and trade must be delayed with positive probability.

Keywords: Delay of Trade; Holdup Problem; Search (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2007-05
New Economics Papers: this item is included in nep-dge and nep-gth
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http://www2.econ.osaka-u.ac.jp/library/global/dp/0713.pdf (application/pdf)

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Journal Article: Holdup, search, and inefficiency (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0713

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