A SURVEY OF THE HOLD‐UP PROBLEM IN THE EXPERIMENTAL ECONOMICS LITERATURE

Yadi Yang

Journal of Economic Surveys, 2021, vol. 35, issue 1, 227-249

Abstract: This paper reviews experimental studies on the so‐called “hold‐up problem.” Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold‐up problem, but to an extent less severe than what standard self‐interest model predicts. Hold‐up occurs at the individual level, but exhibits a less severe pattern than theoretically predicted at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behavior. Social preferences largely influence the results in hold‐up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold‐up problem. These laboratory findings are also relevant to real‐life hold‐up situations, but differences in the specific institution and environment may require more variations in the experimental design.

Date: 2021
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https://doi.org/10.1111/joes.12398

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jecsur:v:35:y:2021:i:1:p:227-249

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