An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game
When an economic exchange requires agreement by multiple independent parties, the potential exists for an individual to strategically delay agreement in an attempt to capture a greater share of the surplus created by the exchange. This “holdout problem” is a common feature of the land assembly literature because development frequently requires the assembly of multiple parcels of land. We use experimental methods to examine holdout behavior in a laboratory bargaining game that involves multi-person groups, complementary exchanges, and holdout externalities. The results of six treatments that vary the bargaining institution, number of bargaining periods, and the cost of delay demonstrate that holdout is common across institutions and is, on average, a payoff-improving strategy for responders. Both proposers and responders take a more aggressive initial bargaining stance in multi-period bargaining treatments relative to single-period treatments, but take a less aggressive bargaining stance when delay is costly. Nearly all exchanges eventually occur in our multi-period treatments, leading to higher overall efficiency relative to the single-period treatments, both with and without delay costs.
|Date of creation:||May 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (410) 293-6800
Fax: (410) 293-6899
Web page: http://www.usna.edu/EconDept/
More information through EDIRC
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.:
- Thomas Miceli & Kathleen Segerson, 2006.
"A Bargaining Model of Holdouts and Takings,"
2006-22, University of Connecticut, Department of Economics, revised Mar 2007.
- 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).
- Houba, Harold & Bolt, Wilko, 2000. "Holdouts, backdating and wage negotiations," European Economic Review, Elsevier, vol. 44(9), pages 1783-1800, October.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, November.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Dawid, Herbert & MacLeod, W. Bentley, 2008. "Hold-up and the evolution of investment and bargaining norms," Games and Economic Behavior, Elsevier, vol. 62(1), pages 26-52, January.
- Brown, David T, 1989. "Claimholder Incentive Conflicts in Reorganization: The Role of Bankruptcy Law," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 109-23.
- 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.
- Tanaka Tomomi, 2007. "Resource Allocation with Spatial Externalities: Experiments on Land Consolidation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-33, January.
- Gu, Wulong & Kuhn, Peter, 1998. "A Theory of Holdouts in Wage Bargaining," American Economic Review, American Economic Association, vol. 88(3), pages 428-49, June.
- 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.
- Blume, Lawrence & Rubinfeld, Daniel L & Shapiro, Perry, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, MIT Press, vol. 99(1), pages 71-92, February.
- Ed Nosal, 2007.
0713, Federal Reserve Bank of Cleveland.
- Ellingsen, Tore & Johannesson, Magnus, 2000.
"Is There a Hold-up Problem?,"
SSE/EFI Working Paper Series in Economics and Finance
357, Stockholm School of Economics.
- Harrison, Glenn W, et al, 1987. "Coasian Solutions to the Externality Problem in Experimental Marke ts," Economic Journal, Royal Economic Society, vol. 97(386), pages 388-402, June.
- Marcus Miller & Dania Thomas, 2007.
"Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights,"
The World Economy,
Wiley Blackwell, vol. 30(10), pages 1491-1509, October.
- Miller, Marcus & Thomas, Dania, 2006. "Sovereign debt restructuring : the Judge, the vultures and creditor rights," The Warwick Economics Research Paper Series (TWERPS) 757, University of Warwick, Department of Economics.
- Miller, Marcus & Thomas, Dania, 2006. "Sovereign Debt Restructuring: the Judge, the Vultures and Creditor Rights," CEPR Discussion Papers 5710, C.E.P.R. Discussion Papers.
- Peter Cramton & Joseph S. Tracy, 1992.
"Strikes and Holdouts in Wage Bargaining: Theory and Data,"
Papers of Peter Cramton
92aer, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
- Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer, vol. 24(2), pages 231-253, August.
- Tomomi Tanaka, 2005. "Resource allocation with spatial externalities: Experiments on land consolidation," Experimental 0511004, EconWPA.
- Sudip Datta & Mai E. Iskandar-Datta, 1995. "Reorganization And Financial Distress: An Empirical Investigation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(1), pages 15-32, 03.
- Hermalin, Benjamin E, 1995. "An Economic Analysis of Takings," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 64-86, April.
- Hege, Ulrich, 2003. "Workouts, court-supervised reorganization and the choice between private and public debt," Journal of Corporate Finance, Elsevier, vol. 9(2), pages 233-269, March.
When requesting a correction, please mention this item's handle: RePEc:usn:usnawp:21. See general information about how to correct material in RePEc.
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.