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A model of seller holdout

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  • Flavio Menezes

    ()

  • Rohan Pitchford

Abstract

We model a buyer who wishes to combine objects owned by two separate sellers in order to realize higher value. Sellers are able to avoid entering into negotiations with the buyer, so that the order in which they negotiate is endogenous. Holdout occurs if at least one of the sellers is not present in the first round of negotiations. We demonstrate that complementarity of the buyer’s technology is a necessary condition for equilibrium holdout. Moreover, a rise in complementarity leads to an increased likelihood of holdout, and an increased efficiency loss. Applications include patents, the land assembly problem, and mergers. Copyright Springer-Verlag Berlin/Heidelberg 2004

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File URL: http://hdl.handle.net/10.1007/s00199-003-0432-x
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 24 (2004)
Issue (Month): 2 (August)
Pages: 231-253

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Handle: RePEc:spr:joecth:v:24:y:2004:i:2:p:231-253

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Bargaining model; Delay; Complementarity; Holdout.;

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Cited by:
  1. Roy Chowdhury, Prabal, 2009. "Land Acquisition: Fragmentation, Political Intervention and Holdout," MPRA Paper 18951, University Library of Munich, Germany.
  2. Gastón Llanes & Stefano Trento, 2012. "Patent policy, patent pools, and the accumulation of claims in sequential innovation," Economic Theory, Springer, vol. 50(3), pages 703-725, August.
  3. Parente, Michael D. & Winn, Abel M., 2012. "Bargaining behavior and the tragedy of the anticommons," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 475-490.
  4. Rohan Pitchford & Mark L. J. Wright, 2010. "Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment," NBER Working Papers 16632, National Bureau of Economic Research, Inc.
  5. Kurtis Swope & Pamela Schmitt & John Cadigan & Ryan Wielgus, 2010. "Contracts, Behavior, and the Land-Assembly Problem:An Experimental Study," Departmental Working Papers 29, United States Naval Academy Department of Economics.
  6. Thomas J. Miceli, 2009. "Free Riders, Holdouts, and Public Use: A Tale of Two Externalities," Working papers 2009-01, University of Connecticut, Department of Economics.
  7. Prabal Roy Chowdhury & Kunal Sengupta, 2008. "Multi-person bargaining with complementarity: Is there holdout?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-10, Indian Statistical Institute, New Delhi, India.
  8. Cadigan, John & Schmitt, Pamela & Shupp, Robert & Swope, Kurtis, 2011. "The holdout problem and urban sprawl: Experimental evidence," Journal of Urban Economics, Elsevier, vol. 69(1), pages 72-81, January.
  9. John Cadigan & Pamela Schmitt & Robert Shupp & Kurtis Swope1, 2009. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 344-457, October.
  10. Roy Chowdhury, Prabal & Sengupta, Kunal, 2012. "Transparency, complementarity and holdout," Games and Economic Behavior, Elsevier, vol. 75(2), pages 598-612.
  11. Steven Shavell, 2007. "Eminent Domain Versus Government Purchase of Land Given Imperpect Information About Owners' Valuation," NBER Working Papers 13564, National Bureau of Economic Research, Inc.
  12. Innes, Robert, 2008. "Entry for merger with flexible manufacturing: Implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 266-287, January.
  13. Usha Sridhar & Sridhar Mandyam, 2013. "A Group Utility Maximizer Mechanism for Land Assembly," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 466-488, October.

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