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Endogenous Property Rights in a Hold up-Experiment

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Author Info
Mathias Erlei
Philipp Siemer () (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal))

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Abstract

In a hold-up experiment designed to test theoretical predictions following from Hart (1995) and deMeza/Lockwood (1998) regarding investment behavior Sonnemans et al. (2001) (SOS) find only a partial confirmation of theory. According to SOS these deviations from standard theory can be explained by positive reciprocal behavior. In this paper, we replicate the experiment by SOS and add another group of treatments in which asset ownership is endogenized by auctioning off the assets. Our experiment shows that the results by SOS crucially depend on the ownership structure being exogenously assigned by the experimenter. We present experimental evidence that, by and large, corroborates the theoretical predictions made by Hart (1995).

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Publisher Info
Paper provided by Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal) in its series TUC Working Papers in Economics with number 0002.

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Length: 32 pages
Date of creation: Apr 2004
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Handle: RePEc:tuc:tucewp:0002

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Keywords: property rights hold-up experiment endogenous ownership structure

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  1. Hoffman, Elizabeth & Spitzer, Matthew L, 1982. "The Coase Theorem: Some Experimental Tests," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 73-98, April.
  2. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  4. Hackett, Steven C, 1994. "Is Relational Exchange Possible in the Absence of Reputations and Repeated Contact?," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 360-89, October.
  5. Sloof, Randolph & Oosterbeek, Hessel & Riedl, Arno & Sonnemans, Joep, 2006. "Breach remedies, reliance and renegotiation," International Review of Law and Economics, Elsevier, vol. 26(3), pages 263-296, September. [Downloadable!] (restricted)
  6. Sonnemans, Joep & Oosterbeek, Hessel & Sloof, Randolp, 2001. "On the Relation between Asset Ownership and Specific Investments," Economic Journal, Royal Economic Society, vol. 111(474), pages 791-820, October. [Downloadable!] (restricted)
  7. Hackett, Steven C, 1993. "Incomplete Contracting: A Laboratory Experimental Analysis," Economic Inquiry, Oxford University Press, vol. 31(2), pages 274-97, April.
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