A Survey of the Hold-Up Problem in the Experimental Economics Literature

Abstract

This paper reviews experimental studies on the so-called \hold-up problem". Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold-up problem, but to an extent less severe than what standard theory predicts. Hold-up occurs at the individual level, but exhibits a less severe pattern than theoretical predictions at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behaviors. Social preferences largely influence the results in hold-up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold-up problem. These fi ndings in the laboratory setting are also relevant in a real life hold-up situation e.g. in the standard-setting context, but differences in the specifi c institution and environment may require more variations in the experimental design.