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Investments and the Holdup Problem in a Matching Market

Investments and the Holdup Problem in a Matching Market

side of the market there is a constant number of active agents who remain in the market until they have traded. Their matching probabilities reflect the relative number of active agents. At each point in time, there is a constant flow of potential market entrants. In the steady state, the number of agents who enter is identical to the number of agents who exit after trade. We combine the market entry stage with the agents’ investment decisions. Each agent who enters the market selects his investment as a best response against the equilibrium choices of the other agents. Our assumptions on the productivity of investments include the different categories that have been considered in the literature on the holdup problem. The model applies for instance to a buyer–seller market in which the sellers make ‘cooperative investments’ in product quality to increase the buyers’ valuation of the good. We also allow for ‘selfish investments’ as for example the acquisition of human capital by workers in a labor market. Further, our analysis applies not only to ‘one–sided investments’ but also to ‘two–sided investments’. In the latter case, the investments on both sides of the markets may be substitutes as well as complements.
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Formal Contracts, Relational Contracts, and the Holdup Problem

Formal Contracts, Relational Contracts, and the Holdup Problem

In our analysis of the repeated interactions between a seller and a buyer, formal contracting can reduce the buyer’s temptation to renege on his/her informal agree- ments with the seller when the relation-specific investment reduces the renegotiation price. And a necessary condition for the relation-specific investment to reduce the renegotiation price is that the investment reduces the alternative-use value, which is a plausible case as we discussed above. The result is that a formal fixed-price con- tract, combined with informal agreements sustained by the value of future relation- ships, can help resolve the holdup problem: A higher investment can be implemented within a wider range of parameter values (e.g., discount factor) with a combination of a formal contract and informal agreements rather than with informal agreements only. In other words, formal contracting can play a complementary role of relaxing the self-enforceability condition for informal agreements. At the same time, however, we also find that there is a certain alternative range of parameterizations in which
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Uncertainty, Reliance, Preliminary Negotiations and the Holdup Problem

Uncertainty, Reliance, Preliminary Negotiations and the Holdup Problem

Uncertainty, Reliance, Preliminary Negotiations and the Holdup Problem SMU Law Review Volume 61 | Issue 4 Article 3 2008 Uncertainty, Reliance, Preliminary Negotiations and the Holdup Problem Juliet P[.]

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Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions

Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions

Pervasive renegotiations that benefit franchise holders beg an explanation, because govern- ments could easily switch managers after a project is built, so threats by the concessionaire to abandon the franchise should be empty. 3 Thus it appears that renegotiations occur without a holdup problem! 4 Of course, there is no question that corruption and incompetence may partly explain why governments accept to renegotiate in favor of franchise holders. But that cannot be the full explanation, because contracts are renegotiated in countries of widely differing in- stitutional strength and corruption levels.
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Holdup and hiring discrimination with search friction

Holdup and hiring discrimination with search friction

A holdup problem arises when some investment is sunked ex ante by one party, and the payoff is shared with that one party’s trading partner. Since cost has no other use once sunk, that trading partner will have every incentive to squeeze the profit at the ex post stage. In an important study on such a problem in a labor market with search friction, Acemoglu and Shimer (1999b) shows that with firms’ sunking capital and ex post wage bargaining, the equilibrium is always inefficient, since wages paid ex post can be so high such that the firms’ ex ante incentive of investment is detrimented; while if firms are able to post wages to direct workers’ search, then the holdup problem to firms’ investment no longer appears; the efficiency can be achieved, because wage posting allows workers to observe offers and choose where to apply, and it induces workers to optimize their expected payoff from application by making trade-off between every wage they observe and the probability of obtaining it.
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Rigidity in bilateral trade with holdup

Rigidity in bilateral trade with holdup

This paper has analyzed a bilateral trade problem in which the seller makes hidden in- vestment that influences the buyer’s hidden valuation, thus creating a holdup problem. Under broad conditions it is impossible for budget-balanced trading mechanisms to im- plement both first-best efficient investment and efficient trade. I fully characterize the constrained efficient contracts. Compared with standard nonlinear pricing without a holdup problem, the optimal trading schedule displays rigidity in the form of bunching when the holdup problem is severe. In particular, bunching and exclusion of trade can occur even if the distribution of buyer types satisfies the usual sorting conditions that guarantee full separation in the standard nonlinear pricing models. Moreover, given the investment level, as the holdup problem becomes more severe trade distortion relative to the efficient level becomes larger across the board for all buyer types.
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No Holdup in Dynamic Markets

No Holdup in Dynamic Markets

This game features a standard holdup problem: Each agent pays the full costs of her invest- ment at time t = 0, but does not fully appropriate the resulting increase in surplus in the matching stage, limiting her incentives to invest efficiently. Indeed, focusing on (Markov) strategies that only condition on the surpluses that the agents that are yet to match can generate, we now argue that there does not exist any Markov-perfect equilibrium featuring efficient investments. For brevity, we consider the case β = 1/2, and we focus on the case in which agents are arbitrarily patient.
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Holdup, Search and Inefficiency

Holdup, Search and Inefficiency

What is the holdup problem? Suppose that a seller delivers one indivis- ible good to a buyer and makes “specific” investment which has value only for the trade relationship with the buyer in question. For example the seller may need to make customized investment which meets the specific require- ments of the buyer. Then, they are locked in “bilateral monopoly” situation and bargain over trade decision ex post after seller’s specific investment was sunk. In the absence of complete contingent contracts the seller expects that some fraction of the return from his investment will be captured by the buyer through ex post negotiation, which in turn undermines the seller’s ex ante investment incentives. This is called the “holdup problem.”
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A Dynamic Theory of Holdup

A Dynamic Theory of Holdup

Our model is related to three branches of literature. First, the current paper sheds some new light on the incomplete contracts literature. This literature, largely taking the underinvestment result as given, has focused on how contractual and organizational safeguards can mitigate the holdup problem: Some authors have proposed vertical integration as a solution (Klein, Crawford and Alchian, 1978; and Williamson, 1979), while others have proposed allocating asset ownership (Grossman and Hart, 1986; and Hart and Moore, 1990), financial control rights (Aghion and Bolton, 1992; and Dewatripont and Tirole, 1994), hierarchical authority (Aghion and Tirole, 1997), to name a few. This literature has been criticized for failing to consider the full set of feasible arrangements. While the empirical relevance of contractual incompleteness is widely acknowledged, there is a sense in which the incomplete contracts literature has not provided sufficient justifications for the predicted forms of contractual incompleteness (see Tirole (1999) for the recent survey). The current paper can be seen as reconciling this apparent tension, since our main result would imply that the underlying incentive problem may not be too worrisome even in the absence of any ex ante contracts. 4
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Renegotiation without Holdup: Anticipating Spending and Infrastructure Concessions

Renegotiation without Holdup: Anticipating Spending and Infrastructure Concessions

Pervasive renegotiations that benefit franchise holders beg an explanation, because govern- ments could easily switch managers after a project is built, so threats by the concessionaire to abandon the franchise should be empty. 3 Thus it appears that renegotiations occur without a holdup problem! 4 Of course, there is no question that corruption and incompetence may partly explain why governments accept to renegotiate in favor of franchise holders. But that cannot be the full explanation, because contracts are renegotiated in countries of widely differing in- stitutional strength and corruption levels.
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Mathematics Problem Solving Skill Acquisition: Learning by Problem Posing or by Problem Solving?

Mathematics Problem Solving Skill Acquisition: Learning by Problem Posing or by Problem Solving?

The pre-solution posing method guides students to effectively use presented information to acquire further knowledge (Silver, 1994). The main stages of the problem posing of pre-solution posing type may include: (a) delivery of materials, (b) students undertaking practice tests in line with teaching material, (c) students are given chance to compile questions from given information, (d) students solve the problems they havemade, and (e) students discuss the results. The teaching strategies in this problem posing method target student analysis of the statement presented, ability to understand the given command, to identify the relevant information (relevant to the material or conceptual knowledge already known by the student), to compile questions, and evaluate the conclusions drawnfrom solving these questions. From these stages, students are trained to improve their problem-solving skills by simulating self- made problems. Particularly, creating problems from an information triggers creative use of previously learned knowledge (Arikan & Unal, 2015).
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Mathematics problem solving skill acquisition: Learning by problem posing or by problem solving

Mathematics problem solving skill acquisition: Learning by problem posing or by problem solving

results are varied (Avouris, Dimitracopoulou, & Komis, 2003; F. Kirschner, Paas, & Kirschner, 2011; Retnowati & Aqiila, 2017; Retnowati, Ayres, & Sweller, 2010, 2016). Kirschner, Paas, and Kirschner (2011) compared instruction with individual to with group on problem solving methods (jigsaw). During the instruction phase,students were given problem-solving tasks that were either solved individually or in groups of three students (jigsaw group). In the jigsaw group, students were designed with peer guided instruction, as each group member had only one-third of all information, so the students had to exchange information to solve the problem. Forindividual instruction, each student was presented with all necessary information to solve the problem alone. The results showed that the group instruction was more effective than the individual. However, when conventional groups of three to four students was used, the contrasting result was shown (Retnowati et al., 2010), as well as when using dyads (Retnowati & Aqiila, 2017), where notably the subjects were novice students. It is assumed that the presentation of information from others during solving a challenging problem caused high extraneous cognitive load. As the theory of expertise reversal describe that the problem solving method is efficient for students with high prior knowledge; students with low prior knowledge will experience high cognitive load resulting in low learning outcomes (Sweller et al., 2011). Consequently, teachers must ensure the level of knowledge base before applying a problem solving method in the classroom, whether students learn alone or in small groups. It should be noted that a conventional small group consists of three to five students who meet face-to-face to solve the same problem through discussion or knowledge sharing. Such instructional strategy sounds beneficial because students could help in other during learning (Arterberry et al., 2007; Hmelo- Silver, 2004). Such comparison will be useful to generate conclusion what instruction is best applied for learning mathematics individually or in small groups when students have sufficient prior knowledge. Therefore, this study was specifically aimed to test three hypotheses: 1) When students have sufficient prior
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Not just an American problem, but a world problem

Not just an American problem, but a world problem

So one of the first steps that we became involved in, those of us who got into the Organization of Afro- American Unity, was to come up with a program that would make our grievances international and make the world see that our problem was no longer a Negro problem or an American problem but a human problem. A problem for humanity. And a problem which should be attacked by all elements of humanity. A problem that was so complex that it was impossible for Uncle Sam to solve it himself and therefore we want to get into a body or conference with people who are in such positions that they can help us get some kind of adjustment for this situation before it gets so explosive that no one can handle it.
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Diabetes: a global problem, a national problem

Diabetes: a global problem, a national problem

Measure, share, improve – Example cases Diabetes care and the extent to which it is recorded both vary significantly in different parts of the world. But early attempts in some countries to measure and record it are already showing links to significant improvements in diabetes care. The initiatives of three countries show what can be achieved through systematic recording and analysis of data. These examples of best practice are a source of insight on the different ways the problem can be tackled, the attitudes of participants and other interested parties, the difficulties encountered and the various solutions used to overcome them.
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Is the Symmetry Problem Really a Problem?

Is the Symmetry Problem Really a Problem?

The first thing to notice about this kind of theory is that it’s already a significant departure from the spirit of Grice’s proposal. Grice aims to show how conversational implicatures arise from the meanings of our words and some minimal assumptions about the nature of cooperative behavior. An alien familiar with the semantic value of ‘some’ and the cooperative maxims should be able to work out the implicature that results from an assertion of ‘I ate some of the leftovers’. Once we supplement the theory with dependence on our brain wiring, the alien is out of luck. Further, this answer to the problem carries the uncomfortable suggestion that if we were more perfect reasoners and not subject to physical limitations, we would derive implicatures from the ‘bad’ alternatives; that we simply neglect to run the Gricean machinery on alternatives that we (idiosyncratically) fail to notice. Moreover, until we have an explanation (or at least a clear statement) of the psychological facts on which we are relying, we are without a predictive theory of implicatures.
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How much of a problem is problem gambling?

How much of a problem is problem gambling?

There is a considerable literature on problem gambling. All of the quantitative work uses one or more of a number of screens that consist of a set of questions that are thought to be indicative of PG. An overview of the problem gambling literature is provided by Orford et al (2003), which exploits the Gambling Prevalence Surveys (GPS) that pre-date the 2010 GPS used in our analysis. Griffiths provides an updated review of the British literature in Griffiths (2014), which includes analysis of the 2010 GPS data used here, as well as providing wider international comparisons. The British GPS is one of a small number of random sample surveys of populations that have been conducted in the world for this purpose – many samples elsewhere are drawn from specific subsets of the population. Indeed, Britain has had three such surveys although the changes across years have been small and the samples are not large enough to have the power to reject stability of the prevalence of problem gambling across time. For the 2010 dataset used here Griffiths argues that “…problem gambling in Great Britain is a minority problem that effects less than 1% of the British population…”, and that “Problem gambling also appears to be less of a problem than many other potentially addictive behaviours” 6 .
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Measurement Scheme of Local Water Holdup in Oil-Water Two-Phase Flow Based on Edge Effect of Interdigital Capacitance Method

Measurement Scheme of Local Water Holdup in Oil-Water Two-Phase Flow Based on Edge Effect of Interdigital Capacitance Method

detecting dielectric constant of the oil-water mixture when flowing through the tow electrodes. It comes from the evolution of parallel plate capacitors (Figure 1(a)). Its structure is shown in Figure 1(b) (L is electrode length, w is electrode width, g is the distance between the electrodes, λ is capacitance unit,h is electrode thickness). Similar with the parallel plate capacitor, a stable electric field is formed by the fringe effect between the two electrodes [5-6]. The permittivity of oil and water is very different, different water holdup correspond to different equivalent permittivity of the mixture between electrodes, and the different equivalent permittivity correspond to different capacitance, so we can get the water holdup by measuring the capacitance value. Figure 1 (c) is a sensor's equivalent circuit model, which consists of a resistor and a capacitor in series.
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The Reference Class Problem is Your Problem Too

The Reference Class Problem is Your Problem Too

Neither term in the ratio is defined, but let us focus on the denominator. According to frequentism, this is another relative frequency. But there's the rub: another relative frequency. The reference class problem strikes again! Qua one way of classifying John Smith, we get one relative frequency for his being a consumptive Englishman aged fifty; qua another way of classifying him, we get another relative frequency. Indeed, in a universe with infinitely many things—quasars, quarks, space-time points all included in their number—almost all of which are not consumptive Englishmen aged fifty, this relative frequency could be as small as 0. That’s hardly comforting for the ratio analysis! But in any case, we only get further relative frequencies—or as I would prefer to put it, we only get further conditional probabilities. Moreover, the conditions, in turn, have various relative frequencies, but yet again, relative to still further reference classes. And so the regress goes. The process never 'bottoms out' with unconditional probabilities. To paraphrase an old joke, it's conditional probabilities all the way down.
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Attentional biases in problem and non-problem gamblers

Attentional biases in problem and non-problem gamblers

attentional biases to gambling stimuli and commit more errors on response inhibition task in gambling-related trials (van Holst et al., 2012). However, some studies have failed to support the evidence of attentional biases in gambling. For example, Diskin and Hodgins (2001), in an effort to replicate their first (1999) experiment, confirmed only partially the pattern of results and (unlike their first study) did not find differences in the reaction times between occasional and problem gamblers. Similarly, Atkins and Sharpe (2003) examined reaction times with a modified Stroop Task in high- and low-frequency problem gamblers and found no difference between the two groups. Other studies have found no differences in the speed of reading relevant words between gamblers and control groups when the participants were not under the effect of dopamine agonist (Zack and Poulos, 2004) or antagonist (Zack and Poulos, 2007). These findings, that do not support the presence of attentional biases among gamblers, are probably due to the small samples (Atkins and Sharpe, 2003; Zack and Poulos, 2004, 2007) and/or to the absence of problem gambling among participants (Atkins and Sharpe, 2003).
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Design as interactions of problem framing and problem solving

Design as interactions of problem framing and problem solving

Why is a logically admissible design questioned? We already mentioned that one reason is the difference between an explicit frame and the implicit and ‘tacit’ expectations. The adjective ‘tacit’ deserves more attention because it seems to be closely related to problem framing. In section 2, we defined design frame as an inter- pretation of an ill-structured problem using a familiar vocabulary of the similar design cases tackled in the past. The ‘tacit’ and implicit expectations draw on these familiar, past situations. A designer may perceive a similarity between the current and previous cases on dif- ferent levels of abstraction. Sometimes, the analogy may be too ab- stract or too complex to articulate it in the explicit terms of a chosen conceptualisation. Simpler analogies may be re-used in tackling the new problem easily; the more abstract ones may remain ‘hidden’.
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