In economics, the hold-up problem is central to the theory of incomplete contracts, and shows the difficulty in writing complete contracts. A hold-up problem arises when … See more

In a scenario where two risk-neutral parties S (supplier) and B (Buyer) can make profit by working together, it is efficient to work together as long as the buyers' valuation … See more

Contractual
Rogerson (1992) showed the existence of a first-best contractual solution to the hold-up problem in even extremely complex environments … See more

• Balkenborg, D., Kaplan, T.R., & Miller, T. (2010). A simple economic teaching experiment on the hold-up problem. MPRA Paper No. 24772. See more

It is often argued that the possibility of a hold-up can lead to underinvestment in relation-specific investment and thus inefficiency. Underinvestment occurs because investors cannot guarantee themselves a sufficient share of the return through ex post … See more

Auto industry
A historic example concerns the US car industry, but the example is sharply disputed by Coase (2000). Fisher Body had an exclusive … See more

• Commitment Device
• Corporate finance approaches:
• Contract theory See more