Group Identity and Relation-Specific Investment: An Experimental Investigation

Feb 3rd, 2012
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This paper is provided as a study guide only, please do not submit this document directly to any university. In this set-up, consider the interaction between the seller and the buyer similar to the one presented in Subsection 3.1. If the seller invests F, he produces a good that has value G (> F) for the buyer. Under integration, the good belongs to the buyer, who provides p to the seller. In contrast, under non-integration, the buyer makes a take-it-or-leave-it offer p to the seller. If the seller accepts p, then the buyer obtains the good, while if the seller rejects p, he sells the good to an alternative use at the price of A (< G). At the same time, assume that both the seller and the buyer have other-regarding preferences.

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