A model of seller holdout

Flavio Menezes; Rohan Pitchford

doi:10.1007/s00199-003-0432-x

A model of seller holdout

Flavio Menezes^*, Rohan Pitchford

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

45 Citations (Scopus)

Abstract

We model a buyer who wishes to combine objects owned by two separate sellers in order to realize higher value. Sellers are able to avoid entering into negotiations with the buyer, so that the order in which they negotiate is endogenous. Holdout occurs if at least one of the sellers is not present in the first round of negotiations. We demonstrate that complementarity of the buyer's technology is a necessary condition for equilibrium holdout. Moreover, a rise in complementarity leads to an increased likelihood of holdout, and an increased efficiency loss. Applications include patents, the land assembly problem, and mergers.

Original language	English
Pages (from-to)	231-253
Number of pages	23
Journal	Economic Theory
Volume	24
Issue number	2
DOIs	https://doi.org/10.1007/s00199-003-0432-x
Publication status	Published - Aug 2004

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A model of seller holdout

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