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Investment and Bargaining in Joint Ventures: A Family Decision Making Experiment

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Listed:
  • Werner Güth
  • Radosveta Ivanova-Stenzel
  • Matthias Sutter
  • Hannelore Weck-Hannemann

Abstract

Bilateral joint ventures, such as marriage, are economically inspired by their prospects of labor division and specialization. However, specialization makes the partnerwho investsmore in relation-specificqualificationsmore exploitable (holdup problem). In a two-person experiment we study investment and bargaining behavior when specialization improves the chances to win a large prize. A low (full) joint venture relies on an intermediate (high) degree of specialization and low (high) costs in case of failure, e.g., a divorce. Results show that participants choose endogenouslymore efficient joint-venture types and acceptminor attempts at exploitation when bargaining over the revenues of the joint venture.

Suggested Citation

  • Werner Güth & Radosveta Ivanova-Stenzel & Matthias Sutter & Hannelore Weck-Hannemann, 2003. "Investment and Bargaining in Joint Ventures: A Family Decision Making Experiment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(2), pages 323-341, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200306)159:2_323:iabijv_2.0.tx_2-r
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    References listed on IDEAS

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    Cited by:

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    2. Smith, Ian, 2007. "Property division on divorce with inequity aversion," International Review of Law and Economics, Elsevier, vol. 27(2), pages 111-128.
    3. Werner Güth & Radosveta Ivanova‐Stenzel & Sigve Tjotta, 2004. "Please, Marry Me! An Experimental Study of Risking a Joint Venture," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 1-21, February.

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    More about this item

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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