A Survey of the Hold-Up Problem in the Experimental Economics Literature

Yang, Yadi

doi:10.2139/ssrn.3203629

Cited by 1 publication

(1 citation statement)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In previous experimental studies (on various hold-up games), it has been well documented that non-monetary incentives affect people's investment and bargaining behavior [8,9]. For example, reciprocity is one of the main explanations behind the deviations from a self-regarding view of relation-specific investments [10][11][12].…”

Section: Introductionmentioning

confidence: 99%

Reciprocity and Veto Power in Relation-Specific Investments: An Experimental Study

Zheng

Wang

et al. 2020

Sustainability

View full text Add to dashboard Cite

Relation-specific investments are usually associated with great risk. Investors, afraid of being held up, are likely to invest too little, endangering both financial and organizational sustainability. Theory suggests that relation-specific investment decisions are mainly affected by potential ex-post bargaining, while experimental evidence shows social-preference-driven thinking affects both investors’ and investees’ behavior. We decompose an experimental hold-up game to identify the effect of reciprocity and the effect of veto power on investees’ transfers. In addition, we investigate the effects of corresponding information disclosures on investors’ performance as possible behavioral remedies to the hold-up problem. We find strong evidence of the effect of reciprocity and reciprocity-related information significantly lower investors’ suboptimal investment. Investors underestimate the effect of reciprocity without related information disclosure. In contrast, we find little evidence of the effect of ex-post veto power on investment decisions. Our results imply that reciprocity-related information disclosure is helpful in promoting both financial and organizational sustainability.

show abstract