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Double Auctions, Ex-Post Participation Constraints, and the Hold-Up Problem

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  • Troger, Thomas

Abstract

This paper makes two contributions in the context of seller-buyer relationships with bilateral relationship-specific investment. Firstly, we demonstrate how ex-post negotiations via double auctions can be used to alleviate and often resolve the hold-up problem. Secondly, we show that ex-post participation constraints make the hold-up problem unavoidable in environments where (i)pro duction costs are relatively high compared to valuations and (ii)the trade price is independent of the investment levels.

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  • Troger, Thomas, 2002. "Double Auctions, Ex-Post Participation Constraints, and the Hold-Up Problem," University of California at Santa Barbara, Economics Working Paper Series qt3f2509gz, Department of Economics, UC Santa Barbara.
    • Handle: RePEc:cdl:ucsbec:qt3f2509gz
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    References listed on IDEAS

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