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Holdup, Search and Inefficiency

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  • Shingo Ishiguro

    (Graduate School of Economics, Osaka University)

Abstract

This paper investigates the holdup problem in the dynamic search market where buyers and sellers search for their trading partners and specific investments are made after match but before trade. We show that frictionless (competitive) market imposes severe limitations on attainable efficiencies: Markets with small friction make the holdup problem more serious than those with large friction because in any equilibrium, whether stationary or non-stationary, investment must be dropped down to the minimum level and trade must be delayed with positive probability.

Suggested Citation

  • Shingo Ishiguro, 2007. "Holdup, Search and Inefficiency," Discussion Papers in Economics and Business 07-13, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0713
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0713.pdf
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    References listed on IDEAS

    as
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    Cited by:

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    3. Antonio Nicita, 2013. "Managing Strategically Outside Options under Incomplete Contracts," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 361-374, September.

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    More about this item

    Keywords

    Delay of Trade; Holdup Problem; Search;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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