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Bargaining under incomplete information, fairness, and the hold-up problem

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  • von Siemens, Ferdinand A.
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    Abstract

    In the hold-up problem incomplete contracts cause the proceeds of relationship-specific investments to be allocated by bargaining. This paper investigates the corresponding investment incentives if individuals have heterogeneous fairness preferences. Individual preferences are taken to be private information. Investments can then signal preferences and thereby influence beliefs and bargaining behavior. In consequence, individuals might choose high investments in order not to signal information that is unfavorable in the ensuing bargaining.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 71 (2009)
    Issue (Month): 2 (August)
    Pages: 486-494

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    Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:486-494

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    Web page: http://www.elsevier.com/locate/jebo

    Related research

    Keywords: Hold-up Relationship-specific investments Fairness Reciprocity Asymmetric information Signalling;

    References

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    14. Armin Falk & Urs Fischbacher, 2001. "A Theory of Reciprocity," CESifo Working Paper Series 457, CESifo Group Munich.
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    16. Oliver Hart & John Moore, 2007. "Contracts as Reference Points," ESE Discussion Papers 170, Edinburgh School of Economics, University of Edinburgh.
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    Cited by:
    1. Felix Bierbrauer & Nick Netzer, 2012. "Mechanism Design and Intentions," Working Paper Series in Economics 53, University of Cologne, Department of Economics, revised 21 Aug 2012.
    2. Hoppe, Eva I. & Schmitz, Patrick W., 2009. "Can Contracts Solve the Hold-Up Problem? Experimental Evidence," CEPR Discussion Papers 7205, C.E.P.R. Discussion Papers.
    3. von Siemens, Ferdinand A., 2013. "Intention-based reciprocity and the hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 55-65.
    4. Bruttel, Lisa & Eisenkopf, Gerald, 2012. "No contract or unfair contract: What's better?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 384-390.
    5. John Duffy & Felix Munoz-Garcia, 2012. "Cooperation and Signaling with Uncertain Social Preferences," Working Papers 491, University of Pittsburgh, Department of Economics, revised May 2013.
    6. repec:dgr:uvatin:2011115 is not listed on IDEAS
    7. Rasch, Alexander & Wambach, Achim & Wiener, Kristina, 2012. "Bargaining and inequity aversion: On the efficiency of the double auction," Economics Letters, Elsevier, vol. 114(2), pages 178-181.
    8. Ferdinand von Siemens, 2011. "Intention-Based Reciprocity and the Hidden Costs of Control," CESifo Working Paper Series 3553, CESifo Group Munich.
    9. Ferdinand von Siemens, 2011. "Intention-Based Reciprocity and the Hidden Costs of Control," Tinbergen Institute Discussion Papers 11-115/1, Tinbergen Institute.
    10. Stefan Kohler, 2012. "Incomplete Information about Social Preferences Explains Equal Division and Delay in Bargaining," Games, MDPI, Open Access Journal, vol. 3(3), pages 119-137, September.

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