Can Contracts Solve the Hold-Up Problem? Experimental Evidence

  title={Can Contracts Solve the Hold-Up Problem? Experimental Evidence},
  author={Eva I. Hoppe and P. Schmitz},
  journal={Contracts & Commercial Law eJournal},
  • Eva I. Hoppe, P. Schmitz
  • Published 2011
  • Computer Science
  • Contracts & Commercial Law eJournal
  • In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem when renegotiation cannot be prevented. Ultimately, the question has to be answered empirically. As a first step in that direction, we have conducted a laboratory experiment with 490 participants. We consider "cooperative" investments that directly benefit the non-investing party. While according to standard theory, contracting would be useless if renegotiation cannot be ruled… CONTINUE READING
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