Holdout: Existence, Information, and Contingent Contracting

Sean M. Collins and R. Isaac

Journal of Law and Economics, 2012, vol. 55, issue 4, 793 - 814

Abstract: The holdout problem permeates policy discussions of legal issues involving bargaining for land acquisition and more broadly impacts multilateral bargaining between agents. Laboratory experiments investigate the scope of the holdout problem. The research strategy incorporates as treatment variables available information and the exposure problem arising from the unavailability of contingent contracts. An examination reveals that holdout can reliably produce large inefficiencies and lost opportunities for mutually advantageous trade. The introduction of contingent contracts facilitates successful bargaining. However, buyers are not made significantly better off by contingent contracts.

Date: 2012
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