Cognitive Scaffold

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MENTAL MODEL · M1613

Hold-up Problem

Hold-up Problem
BusinessHigh supportEconomics
Included
account_tree

Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

When one party makes a specific investment for a transaction (e.g., buying specialized machinery to manufacture for Apple), the other party (Apple) has an incentive to exploit this by demanding renegotiation of the price, because the investor cannot easily repurpose the machinery.

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

Guard against being locked in. In cooperation, if you invest in resources that only the other party can use (specific assets), you lose bargaining power. This must be addressed through long-term contracts, cross-shareholding, or vertical integration.

anchor

Anchor fast decisions

After asset-specific investment, the trading partner may opportunistically demand a larger share of the quasi-rents, leading to underinvestment ex ante. It is a core challenge in vertical integration and contract design.

MINIMUM ACTION

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Source support: Explicit

  • link
    en.wikipedia.orghttps://en.wikipedia.org/wiki/Hold-up_problemZH · Explicit
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