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An Experimental Study Of The Holdout Problem In A Multilateral Bargaining Game, John J. Cadigan, Pamela Schmitt, Robert Shupp, Kurtis Swope

Economics Faculty Publications

When an economic exchange requires agreement by multiple independent parties, the potential exists for an individual to strategically delay agreement in an attempt to capture a greater share of the surplus created by the exchange. This "holdout problem" is a common feature of the land-assembly literature because development frequently requires the assembly of multiple parcels of land. We use experimental methods to examine holdout behavior in a laboratory bargaining game that involves multi-person groups, complementary exchanges, and holdout externalities. The results of six treatments that vary the bargaining institution, number of bargaining periods, and cost of delay demonstrate that holdout …