A Simple Economic Teaching Experiment on the Hold-Up Problem

Dieter Balkenborg, Todd Kaplan and Timothy Miller

The Journal of Economic Education, 2012, vol. 43, issue 4, 377-385

Abstract: The hold-up problem is central to the theory of incomplete contracts. This can occur if, after making a sunk investment in a relationship, one party can be taken advantage of by the other party, leading to inefficient underinvestment. The authors describe a simple teaching experiment that illustrates the hold-up problem, and address how to integrate it into a class.

Date: 2012
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Working Paper: A simple economic teaching experiment on the hold-up problem (2010)
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DOI: 10.1080/00220485.2012.714310

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