Contracts, Behavior, and the Land-Assembly Problem:An Experimental Study
We 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.
|Date of creation:||Jan 2010|
|Date of revision:|
|Contact details of provider:|| Postal: 589 McNair Road, Annapolis, MD 21402-5030|
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.:
- Ellingsen, Tore & Robles, Jack, 2000.
"Does Evolution Solve the Hold-up Problem?,"
SSE/EFI Working Paper Series in Economics and Finance
358, Stockholm School of Economics.
- Tore Ellingsen & Jack Robles, 2000. "Does Evolution Solve the Hold-up Problem," Econometric Society World Congress 2000 Contributed Papers 1525, Econometric Society.
- Tore Ellingsen & Magnus Johannesson, 2004.
"Is There a Hold-up Problem?,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 106(3), pages 475-494, October.
- 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.
- Thomas Miceli & Kathleen Segerson, 2006.
"A Bargaining Model of Holdouts and Takings,"
2006-22, University of Connecticut, Department of Economics, revised Mar 2007.
- Ed Nosal, 2007.
0713, Federal Reserve Bank of Cleveland.
- 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.
- 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).
- Stephanie Lau, 2008. "Information and bargaining in the hold-up problem," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 266-282.
- Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, 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.
- Schmitz, Patrick W., 2008.
"Incomplete contracts, the hold-up problem, and asymmetric information,"
Elsevier, vol. 99(1), pages 119-122, April.
- Schmitz, Patrick W, 2007. "Incomplete Contracts, the Hold-Up Problem and Asymmetric Information," CEPR Discussion Papers 6322, C.E.P.R. Discussion Papers.
- Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 231-253, August.
- 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.
- 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.
- 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.
- Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
When requesting a correction, please mention this item's handle: RePEc:usn:usnawp:29. 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.