Holdup: Investment Dynamics, Bargaining and Gradualism

TOPIC: 

Holdup: Investment Dynamics, Bargaining and Gradualism

ABSTRACT

This paper examines holdup in a dynamic framework, that allows one to study the role of gradualism in resolving holdup. We find that the analysis critically depends on whether the investments by the buyer and the seller are substitutes, or complements. In case the investments are substitutes, `efficiency' may require gradualism whenever individual rationality fails. In case the investments are complements, there is no role for gradualism. In case only one of the agents can invest, then `asymptotic eciency' obtains unconditionally, i.e. irrespective of whether individual rationality holds, or not. We extend the literature by showing that, with one sided/complementary investments, holdup can be resolved even when individual rationality fails.

Presenter

Prabal Roy Chowdhury
Indian Statistical Institute

Research Fields

Game theory, industrial organization, bargaining, development economics - micro-finance, land acquisition.

Date:

21 August 2013 (Wednesday)

Time: 

3.45pm - 5.15pm 

Venue: 

Seminar Room 5.1, Level 5
School of Economics 
Singapore Management University
90 Stamford Road
Singapore 178903