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Hold-up in vertical hierarchies with adverse selection

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  • Palermo, Alberto

Abstract

This paper studies bargaining with hold-up in presence of adverse selection and endogenous type distribution. With limited liability for the agent, quantities of first best are not socially optimal. The allocation of bargaining power is never completely in favor of one party.

Suggested Citation

  • Palermo, Alberto, 2016. "Hold-up in vertical hierarchies with adverse selection," Economics Letters, Elsevier, vol. 148(C), pages 91-95.
    • Handle: RePEc:eee:ecolet:v:148:y:2016:i:c:p:91-95
    DOI: 10.1016/j.econlet.2016.09.025
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    References listed on IDEAS

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    1. Inderst, Roman, 2002. "Contract design and bargaining power," Economics Letters, Elsevier, vol. 74(2), pages 171-176, January.
    2. Antonio Cabrales & Gary Charness & Marie Villeval, 2011. "Hidden information, bargaining power, and efficiency: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 133-159, May.
    3. Bental, Benjamin & Demougin, Dominique, 2010. "Declining labor shares and bargaining power: An institutional explanation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 443-456, March.
    4. Roman Inderst, 2003. "Alternating-offer bargaining over menus under incomplete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(2), pages 419-429, September.
    5. Marina Halac, 2015. "Investing in a relationship," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 165-185, March.
    6. Deffains, Bruno & Demougin, Dominique, 2008. "Legal competition, political process and irreversible investment decisions," European Journal of Political Economy, Elsevier, vol. 24(3), pages 615-627, September.
    7. Yao, Zhiyong, 2012. "Bargaining over incentive contracts," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 98-106.
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    More about this item

    Keywords

    Bargaining; Adverse selection; Hold-up;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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