In economic environments, decision-makers can strategically delay irreversible investments to learn from the actions of others. This creates free-riding incentives and can lead to socially suboptimal outcomes. We experimentally examine if and how communication mitigates this free-riding problem...

In economic environments, decision-makers may strategically delay irreversible investments to learn from the actions of others creating socially suboptimal outcomes. We investigate if and how communication mitigates the strategic delay in investment timings. Players choose when to invest in a...

We report results from an experiment based on a simplified version of Hart's (1995) property rights theory of the firm. Only one manager invests and this investment is completely specific. In that case the theory predicts that the level of investment is not affected by the level of no-trade...

Breach remedies serve an important role in protecting relationship-specific investments. Theory predicts that some common remedies protect too well and induce over investment, either though complete insurance against potential separation or the possibility that breach is prevented by increasing...

Breach penalties can be used to protect specific investments and are therefore a remedy against holdup. Not all breach remedies are, however, equally efficient. Some common types are predicted to protect too well thereby inducing overinvestment. Theoretically overinvestment is driven by two...