Authors
Date (dd-mm-yyyy)
2004
Title
Specific investments, holdup, and the outside option principle
Journal
European Economic Review
Volume
48
Publication Year
2004
Pages
1399-1410
Issue number
6
Document type
Article
Faculty
Faculty of Economics and Business (FEB)
Institute
Amsterdam School of Economics Research Institute (ASE-RI)
Abstract
According to the outside option principle the holdup problem can be solved when the non-investor has a binding outside option. The investor then becomes residual claimant, creating efficient investment incentives. This paper reports about an experiment designed to test this. We find that when the outside option is binding investment levels fall short of the efficient level, but holdup is less of a problem than predicted when the outside option is non-binding.
URL
go to publisher's site
Permalink
https://hdl.handle.net/11245/1.250956