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Hold-up: with a vengeance

Dufwenberg, Martin and Smith, Alec and Van Essen, Matt (2013) Hold-up: with a vengeance. Economic Inquiry, 51 (1). pp. 896-908. ISSN 0095-2583. doi:10.1111/j.1465-7295.2010.00366.x.

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When contracts are incomplete or unenforceable, inefficient levels of investment may occur because of hold-up. If individuals care for negative reciprocity, these problems may be reduced, as revenge becomes a credible threat. However, negative reciprocity has this effect only when the investor holds the rights of control of the investment proceeds. We explore this issue analytically, deriving predictions for hold-up games which differ as regards assignment of rights of control. We also test and support these predictions in an experiment.

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Smith, Alec0000-0002-1938-4660
Additional Information:© 2011 Western Economic Association International. Issue published online: 29 November 2012; article first published online: 8 February 2011. We thank Gary Charness, Yan Chen, Jim Cox, Andrew Daughety, Tore Ellingsen, Ben Hermalin, Georg Kirchsteiger, Jennifer Reinganum, Uzi Segal, Joel Sobel, an anonymous referee, and participants of several seminars for helpful comments, and Bruce Willis and his 1995 team for inspiration for the title. Dufwenberg’s research was supported by the NSF (grant # SES-0921929).
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Issue or Number:1
Classification Code:JEL: C72, C92, D23, L14
Record Number:CaltechAUTHORS:20130115-160201583
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Official Citation:DUFWENBERG, M., SMITH, A. and VAN ESSEN, M. (2013), HOLD-UP: WITH A VENGEANCE. Economic Inquiry, 51: 896–908. doi: 10.1111/j.1465-7295.2010.00366.x
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:36410
Deposited On:16 Jan 2013 00:22
Last Modified:09 Nov 2021 23:22

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