Voluntary contributions to bargaining: hold-up problem in the lab


A two-stage game is designed to study voluntary contribution decisions when the distribution of the surplus is negotiated through a bargaining game. At the same time, the experimental design allows to investigate how the bargaining outcome is influenced by such relationspecific contributions. Findings show that when players are loss averse the distribution of relation-specific contributions matter for the division of the bargaining pie, such that high contributors earn more. When players experience a proportional split of the pie in the previous bargaining game they are found to be more incline to contribute in the future. Unfortunately these two positive effects are not sufficient to overcome the hold-up problem. In fact, asymmetries in bargaining influence opening offers in a self-serving way, which create disagreement and delay. Finally, contributing nothing is still what maximized the net total profit while contributing everything can also lead to losses.

Published June 27, 2017 12:04 PM - Last modified June 28, 2017 11:41 AM