Contracts, Behavior, and the Land-Assembly Problem:An Experimental Study
AbstractWe use multilateral bargaining experiments to examine how the order of bargaining (simultaneous or sequential) and the nature of contracts (contingent or non-contingent) affect the duration of bargaining, the efficiency of exchange, and the distribution of the surplus in a laboratory land-assembly game with one buyer and two sellers. While theory predicts an earnings advantage for the first seller when contracts are sequential and contingent, and for the second seller when contracts are sequential and non-contingent, we find that when a seller has an earnings advantage in the laboratory, it is the first seller to bargain in the non-contingent contract treatments. This result contradicts conventional wisdom and a common result from the land-assembly literature that it is advantageous to be the last seller to bargain, a so-called “holdout”. We also find evidence that sequential bargaining leads to more aggressive seller bargaining and greater bargaining delay than simultaneous bargaining, ceteris paribus, and that non-contingent contracts increase bargaining delay and the likelihood of failed agreements. The majority of sellers indicated a preference for being the first seller to bargain in all sequential bargaining treatments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by United States Naval Academy Department of Economics in its series Departmental Working Papers with number 29.
Length: 32 pages
Date of creation: Jan 2010
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Menezes, Flavio Marques & Pitchford, Rohan, 2001.
"The Land Assembly Problem Revisited,"
Economics Working Papers (Ensaios Economicos da EPGE)
427, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer, vol. 24(2), pages 231-253, August.
- Gneezy, Uri & Haruvy, Ernan & Roth, Alvin E., 2003. "Bargaining under a deadline: evidence from the reverse ultimatum game," Games and Economic Behavior, Elsevier, vol. 45(2), pages 347-368, November.
- Kurtis Swope & Pamela Schmitt & John Cadigan & Robert Shupp, 2009.
"The Holdout Problem and Urban Sprawl: Experimental Evidence,"
Departmental Working Papers
24, United States Naval Academy Department of Economics.
- 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.
- Stephanie Lau, 2008. "Information and bargaining in the hold-up problem," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 266-282.
- Ellingsen, Tore & Robles, Jack, 2002.
"Does Evolution Solve the Hold-Up Problem?,"
Games and Economic Behavior,
Elsevier, vol. 39(1), pages 28-53, April.
- Tore Ellingsen & Jack Robles, 2000. "Does Evolution Solve the Hold-up Problem," Econometric Society World Congress 2000 Contributed Papers 1525, Econometric Society.
- Ellingsen, Tore & Robles, Jack, 2000. "Does Evolution Solve the Hold-up Problem?," Working Paper Series in Economics and Finance 358, Stockholm School of Economics.
- Schmitz, Patrick W., 2007.
"Incomplete Contracts, the Hold-Up Problem and Asymmetric Information,"
CEPR Discussion Papers
6322, C.E.P.R. Discussion Papers.
- Schmitz, Patrick W., 2008. "Incomplete contracts, the hold-up problem, and asymmetric information," Economics Letters, Elsevier, vol. 99(1), pages 119-122, April.
- 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.
- Kurtis Swope & Pamela Schmitt & John Cadigan & Robert Shupp, 2008. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Departmental Working Papers 21, United States Naval Academy Department of Economics.
- Thomas J. Miceli & Kathleen Segerson, 2007.
"A Bargaining Model of Holdouts and Takings,"
American Law and Economics Review,
Oxford University Press, vol. 9(1), pages 160-174.
- Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
- Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, November.
- Miceli, Thomas J. & Sirmans, C.F., 2007. "The holdout problem, urban sprawl, and eminent domain," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 309-319, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.