Free Access
Issue |
E.J.E.S.S.
Volume 15, Number 3, 2001
Evolution and Learning in Markets
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Page(s) | 153 - 169 | |
DOI | https://doi.org/10.1051/ejess:2001102 |
DOI: 10.1051/ejess:2001102
European Journal of Economic and Social Systems 15 N°3 (2001) 153-169
Department of Economics, The University of Southern California, Los Angeles, CA 90089-0253, USA.
Key words: Hold up problem, bargaining, evolution.
© EDP Sciences 2001
European Journal of Economic and Social Systems 15 N°3 (2001) 153-169
Holdup and the evolution of bargaining conventions
Herbert Dawid and W. Bentley MacLeodDepartment of Economics, The University of Southern California, Los Angeles, CA 90089-0253, USA.
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 the long run
outcome of a stochastic adaptation process similar to Young (1993)'s
`adaptive play' does not in general correspond to the efficient equilibria.
As Grossman and Hart (1986) observe, institutions, such as firms, may be
needed to improve the allocation of resources.
Key words: Hold up problem, bargaining, evolution.
© EDP Sciences 2001