Ex Post Destruction in the Hold-up Problem

• Main Authors: WANG, Huan, ZHANG, Juyuan, ZHANG, Yi
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: Destruction; Hold-up; Underinvestment; Incomplete Information; Behavioral Economics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/1487; https://ink.library.smu.edu.sg/context/soe_research/article/2486/viewcontent/Holdup_destruction.pdf
• Institution: Singapore Management University

We investigate whether or not ex post destruction can solve the hold-up problem. After clarifying the difference between ex post destruction and nontrade when negotiation breaks down, we show that the option of ex post destruction is not sufficient to enhance ex ante efficiency. In particular, only...