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Endogenous Property Rights in a Hold up-Experiment

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Abstract

In a hold-up experiment designed to test theoretical predictions following from Hart (1995) and deMeza/Lockwood (1998) regarding investment behavior Sonnemans et al. (2001) (SOS) find only a partial confirmation of theory. According to SOS these deviations from standard theory can be explained by positive reciprocal behavior. In this paper, we replicate the experiment by SOS and add another group of treatments in which asset ownership is endogenized by auctioning off the assets. Our experiment shows that the results by SOS crucially depend on the ownership structure being exogenously assigned by the experimenter. We present experimental evidence that, by and large, corroborates the theoretical predictions made by Hart (1995).

Suggested Citation

  • Mathias Erlei & Philipp Siemer, 2004. "Endogenous Property Rights in a Hold up-Experiment," TUC Working Papers in Economics 0002, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    • Handle: RePEc:tuc:tucewp:0002
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    1. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
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    Cited by:

    1. Mathias Erlei & Wiebke Roß, 2013. "Bounded Rationality as an Essential Component of the Holdup Problem," TUC Working Papers in Economics 0009, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
    2. Kusterer, David J. & Schmitz, Patrick W., 2017. "The management of innovation: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 104(C), pages 706-725.
    3. Schmitz, Patrick W., 2017. "Incomplete contracts, shared ownership, and investment incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 153-165.
    4. Erlei Mathias & Schenk-Mathes Heike, 2017. "Bounded Rationality in Principal-Agent Relationships," German Economic Review, De Gruyter, vol. 18(4), pages 411-443, December.
    5. Schmitz, Patrick W. & Kusterer, David J., 2018. "Government versus Private Ownership of Public Goods: Experimental Evidence," CEPR Discussion Papers 13204, C.E.P.R. Discussion Papers.
    6. Kusterer, David J. & Schmitz, Patrick W., 2020. "Public goods, property rights, and investment incentives: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 514-532.

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    Keywords

    property rights; hold-up; experiment; endogenous ownership structure;
    All these keywords.

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