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Double Auctions, Ex-Post Participation Constraints, and the Hold-Up Problem

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  • Troger, Thomas

Abstract

This paper makes two contributions in the context of seller-buyer relationships with bilateral relationship-specific investment. Firstly, we demonstrate how ex-post negotiations via double auctions can be used to alleviate and often resolve the hold-up problem. Secondly, we show that ex-post participation constraints make the hold-up problem unavoidable in environments where (i) production costs are relatively high compared to valuations and (ii) the trade price is independent of the investment levels.

Suggested Citation

  • Troger, Thomas, 2002. "Double Auctions, Ex-Post Participation Constraints, and the Hold-Up Problem," University of California at Santa Barbara, Economics Working Paper Series qt5qv060md, Department of Economics, UC Santa Barbara.
  • Handle: RePEc:cdl:ucsbec:qt5qv060md
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    References listed on IDEAS

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    13. Ilya Segal, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 57-82.
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