Arbeitspapier
The Holdout Problem and Long-Term Contracting
The holdup problem of under-investment in specific capital has been studied extensively. Less attention has been paid to the "holdout" problem of over-investment in outside options. A buyer's gain from (unverifiably) developing an outside option exceeds the joint gain, given rent shifting when an inferior option binds in subsequent bargaining with the seller. Long-term contracts can solve holdout by increasing the buyer's surplus from trade within the relationship. With a nonbinding contract, however, the seller's participation constraint may require the buyer (who may be financially constrained) to pay a large signing bonus. This suggests a novel motive for vertical integration.
- Language
-
Englisch
- Bibliographic citation
-
Series: EAG Discussion Paper ; No. EAG 07-13
- Classification
-
Wirtschaft
- Event
-
Geistige Schöpfung
- (who)
-
Raskovich, Alexander
- Event
-
Veröffentlichung
- (who)
-
U.S. Department of Justice, Antitrust Division, Economic Analysis Group (EAG)
- (where)
-
Washington, DC
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Raskovich, Alexander
- U.S. Department of Justice, Antitrust Division, Economic Analysis Group (EAG)
Time of origin
- 2007
Other Objects (12)
Contracting with long-term consequences
Dynamic Contracting with Long-Term Consequences
Optimal long-term contracting with learning
Long-term contracting in a changing world
Long-term contracting in a changing world
Dynamic contracting with long-term consequences: Optimal CEO compensation and turnover
Long-Term Programm
Short‐term vs. Long‐term Contracting: Empirical Assessment of the Ratchet Effect in Supply Chain Interaction
Long-Term Asset Allocation
Long-term asset allocation
Long-term relationship bargaining
Long-Term Market Outlook
Contracting with long-term consequences
Dynamic Contracting with Long-Term Consequences
Optimal long-term contracting with learning
Long-term contracting in a changing world
Long-term contracting in a changing world
Dynamic contracting with long-term consequences: Optimal CEO compensation and turnover
Long-Term Programm
Short‐term vs. Long‐term Contracting: Empirical Assessment of the Ratchet Effect in Supply Chain Interaction
Long-Term Asset Allocation
Long-term asset allocation
Long-term relationship bargaining
Long-Term Market Outlook
Contracting with long-term consequences
Dynamic Contracting with Long-Term Consequences
Optimal long-term contracting with learning
Long-term contracting in a changing world
Long-term contracting in a changing world
Dynamic contracting with long-term consequences: Optimal CEO compensation and turnover
Long-Term Programm
Short‐term vs. Long‐term Contracting: Empirical Assessment of the Ratchet Effect in Supply Chain Interaction
Long-Term Asset Allocation
Long-term asset allocation
Long-term relationship bargaining