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Collective Hold-Up

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  • Matias Iaryczower
  • Santiago Oliveros

Abstract

We consider dynamic processes of coalition formation in which a principal bargains sequentially with a group of agents. This problem is at the core of a variety of applications in economics and politics, including a lobbyist seeking to pass a bill, an entrepreneur setting up a start-up, or a firm seeking the approval of corrupt bureaucrats. We show that when the principal’s willingness to pay is high, strengthening the bargaining position of the agents generates delay and reduces agents’ welfare. This occurs in spite of the lack of informational asymmetries or discriminatory offers. When this collective action problem is severe enough, agents prefer to give up considerable bargaining power in favor of the principal.

Suggested Citation

  • Matias Iaryczower & Santiago Oliveros, 2022. "Collective Hold-Up," NBER Working Papers 29984, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29984
    Note: IO POL
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    1. Chen, Ying & Zápal, Jan, 2022. "Sequential vote buying," Journal of Economic Theory, Elsevier, vol. 205(C).

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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