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<p>This study examines whether the option of sequential alliances alleviates the hold-up problem in cooperative investment. We consider a situation in which there is one downstream firm and two upstream firms to make relationship-specific investments. We show that the possibility of individual alliances provides incentives for investment when sequential agreements occur on or off the equilibrium path. The option of an individual alliance serves as a punishment for firms that do not invest. An important factor in the effectiveness of the incentive mechanism is that the upstream firms mainly propose alliances and that they have a first-mover advantage in alliance negotiations.</p>

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The option of sequential alliances for cooperative investments

  • 期刊论文

  • 发表日期：

    2026年4月4日

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  • Fumi Kiyotaki,
  • Toshiji Miyakawa

摘要

This study examines whether the option of sequential alliances alleviates the hold-up problem in cooperative investment. We consider a situation in which there is one downstream firm and two upstream firms to make relationship-specific investments. We show that the possibility of individual alliances provides incentives for investment when sequential agreements occur on or off the equilibrium path. The option of an individual alliance serves as a punishment for firms that do not invest. An important factor in the effectiveness of the incentive mechanism is that the upstream firms mainly propose alliances and that they have a first-mover advantage in alliance negotiations.