Article ID Journal Published Year Pages File Type
5072163 Games and Economic Behavior 2011 14 Pages PDF
Abstract
► We study in the lab if contracts can solve the hold-up (underinvestment) problem. ► We consider investments by the seller that increase the buyerʼs valuation. ► Fixed-price contracts do not lead to more investments. ► Non-renegotiable option contracts solve the hold-up problem. ► Renegotiable option contracts acting as reference points still foster investments.
Keywords
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Preview
Can contracts solve the hold-up problem? Experimental evidence
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