Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/140886
Authors: 
Erlei, Mathias
Roß, Wiebke
Year of Publication: 
2015
Series/Report no.: 
Beiträge zur Jahrestagung des Ausschusses für Wirtschaftssysteme und Institutionenökonomik im Verein für Socialpolitik: "Marktwirtschaft im Lichte möglicher Alternativen", 27.-29. September 2015, Bayreuth
Abstract: 
We provide experimental evidence for the hypothesis that bounded rationality is an important element of the theory of the firm. We implement a simplified version of a mechanism designed to perfectly solve the holdup problem under conditions of perfect rationality (Maskin 2002). We test whether this mechanism is able to perfectly solve our experimental holdup problem or may at least improve economic performance. We find that this is not the case: the implementation of the mechanism worsens economic performance. We reconstruct the main features of participants' behavior by applying the logit agent quantal response equilibrium (McKelvey and Palfrey 1998) as an equilibrium concept that takes players' potential mistakes into account.
Subjects: 
bounded rationality
transaction costs
incomplete contracts
experiment
mechanism design
JEL: 
D23
C92
L23
Document Type: 
Conference Paper

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