Tuesday, May 22, 2007

Randolph Sloof

Amsterdam School of Economics

Randolph Sloof

The experimental evaluation of (contractual solutions to) the hold-up problem

Abstract

In a world with incomplete contracts, relationship-specific investments are vulnerable to appropriation by the trading partner. Without contractual safeguards, parties are then predicted to underinvest. This celebrated holdup problem is considered key in a wide variety of economic contexts and many theoretical solutions therefore have been proposed. In this workshop we will discuss the empirical evaluation of both the extent of the holdup problem and the effectiveness of (some of) the suggested remedies by means of laboratory experiments.