A simple economic teaching experiment on the hold-up problem

Dieter Balkenborg, Todd Kaplan and Tim Miller

MPRA Paper from University Library of Munich, Germany

Abstract: The hold-up problem is central to the theory of incomplete contracts. It shows how the difficulty to write complete contracts and the resulting need to renegotiate can lead to underinvestment. We describe the design of a simple teaching experiment that illustrates the hold-up problem. The model used is a simple perfect information game. The experiment can hence also be used to illustrate the concept of subgame perfect equilibrium and the problem of making non-binding commitments.

Keywords: classroom experiment; holdup problem (search for similar items in EconPapers)
JEL-codes: C90 K12 L14 (search for similar items in EconPapers)
Date: 2010-09-03
New Economics Papers: this item is included in nep-exp, nep-gth and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A Simple Economic Teaching Experiment on the Hold-Up Problem (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:24772

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