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Holdup and the Evolution of Bargaining Conventions

Author

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  • Herbert Dawid and Bentley MacLeod

Abstract

As Posner (1997) has observed, when individuals in a relationship can commit to imposing costs upon each other then efficient behavior in the absence of law is possible. The question is whether efficient norms of behavior evolve endogenously in a population. We show that in a standard hold up model in which both parties make relationship specific investments that the long run outcome of a stochastic adaptation process similar to Young's (1993) 'adaptive play' does in general not correspond to the efficient equilibria. As Grossman and Hart (1986) observe, institutions, such as firms, may be needed to improve the allocation of resources.

Suggested Citation

  • Herbert Dawid and Bentley MacLeod, 2001. "Holdup and the Evolution of Bargaining Conventions," Computing in Economics and Finance 2001 104, Society for Computational Economics.
    • Handle: RePEc:sce:scecf1:104
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    Citations

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    Cited by:

    1. Calabuig, Vicente & Olcina, Gonzalo, 2009. "Cooperation and cultural transmission in a coordination game," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 188-201, October.
    2. Dawid, Herbert & MacLeod, W. Bentley, 2008. "Hold-up and the evolution of investment and bargaining norms," Games and Economic Behavior, Elsevier, vol. 62(1), pages 26-52, January.
    3. L. Bagnoli & G. Negroni, 2013. "Egalitarianism. An evolutionary perspective," Working Papers wp888, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Jack Robles, 2008. "Evolution, bargaining, and time preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(1), pages 19-36, April.
    5. L. Bagnoli & G. Negroni, 2012. "On the coevolution of social norms in primitive societies," Working Papers wp858, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Herbert Dawid & Joern Dermietzel, 2006. "How Robust is the Equal Split Norm? Responsive Strategies, Selection Mechanisms and the Need for Economic Interpretation of Simulation Parameters," Computational Economics, Springer;Society for Computational Economics, vol. 28(4), pages 371-397, November.
    7. Olcina, Gonzalo & Penarrubia, Concepcion, 2004. "Hold up and intergenerational transmission of preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 111-132, May.
    8. Tore Ellingsen & Magnus Johannesson, 2004. "Is There a Hold‐up Problem?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 475-494, October.
    9. H. Lorne Carmichael & W. Bentley Macleod, 2006. "Welfare Economics with Intransitive Revealed Preferences: A Theory of the Endowment Effect," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 193-218, May.
    10. Giorgio Negroni & Lidia Bagnoli, 2017. "On the coevolution of social norms in primitive societies," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(3), pages 635-667, October.

    More about this item

    Keywords

    Hold-Up Problem; Bargaining; Evolution;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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