A simple economic teaching experiment on the hold-up problem

Dieter Balkenborg, Todd Kaplan, Timothy Miller

Research output: Contribution to journalArticlepeer-review


The hold-up problem is central to the theory of incomplete contracts. This can occur if, after making a sunk investment in a relationship, one party can be taken advantage of by the other party, leading to inefficient underinvestment. The authors describe a simple teaching experiment that illustrates the hold-up problem, and address how to integrate it into a class.

Original languageEnglish
Pages (from-to)377-385
Number of pages9
JournalJournal of Economic Education
Issue number4
StatePublished - 1 Oct 2012
Externally publishedYes


  • classroom experiments
  • hold-up problem
  • subgame perfection

ASJC Scopus subject areas

  • Education
  • Economics and Econometrics


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