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Full-Text Articles in Economics
How Effective Can Ex Post Destruction Alleviate The Hold-Up Problem?, Huan Wang, Juyuan Zhang, Yi Zhang
How Effective Can Ex Post Destruction Alleviate The Hold-Up Problem?, Huan Wang, Juyuan Zhang, Yi Zhang
Research Collection School Of Economics
We first investigate whether or not ex post destruction can possibly alleviate the hold-up problem in a one-shot game between a supplier and a buyer. The answer is yes but only when the buyer believes that the supplier might be a Homo reciprocans agent with sufficiently strong propensity for reciprocity. Under incomplete information with informed supplier, investment is made feasible by the “mismatch” between the buyer’s belief of stronger supplier reciprocal propensity and a de facto weaker one. Under incomplete information with uninformed supplier, the “mismatch” between the buyer’s belief of weaker supplier reciprocal propensity and a stronger ex post …
Sequential Investment, Hold-Up, And Ownership Structure, Juyuan Zhang, Yi Zhang
Sequential Investment, Hold-Up, And Ownership Structure, Juyuan Zhang, Yi Zhang
Research Collection School Of Economics
We construct a sequential investment model to investigate individual firms’ strategic choices of organizational forms when outsourcing their intermediate products. Our results indicate that as a result of the encouragement effect of sequential complementary investments, sequential investment alleviates the underinvestment caused by the hold-up problem. Thereafter, we analyze the impact of sequential investment on the choice of ownership structure. We show that contrary to the result of the standard property rights theory, strictly complementary assets could be owned separately.