Bounded Rationality as an Essential Component of the Holdup Problem

Arbeitspapier

We provide experimental evidence for the hypothesis that bounded rationality is an important element of the theory of the firm. We implement a simplified version of a mechanism that was designed in order to perfectly solve the holdup problem under conditions of perfect rationality (Maskin 2002). We test whether this mechanism either is able to perfectly solve our experimental holdup problem or may at least improve economic performance. We show that neither is the case: the implementation of the mechanism worsens economic performance. We reconstruct the main features of participants’ behavior by applying the logit agent quantal response equilibrium (McKelvey and Palfrey 1998) as an equilibrium concept that takes players’ potential mistakes into account.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: TUC Working Papers in Economics ; No. 09

Classification and Topics

• Classification: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Design of Experiments: Laboratory, Group Behavior ; Organization of Production
• Subject: Bounded rationality ; transaction costs ; incomplete contracts ; experiment ; mechanism design

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Erlei, Mathias ; Roß, Wiebke
• Event: Veröffentlichung
• (who): Technische Universität Clausthal, Abteilung für Volkswirtschaftslehre
• (where): Clausthal-Zellerfeld
• (when): 2013

Further information

• DOI: doi:10.21268/20161213-133222
• Handle: http://hdl.handle.net/10419/107450
• Last update: 10.03.2025, 11:45 AM CET