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The Elgar Companion to Ronald H. Coase

The Elgar Companion to Ronald H. Coase

Edited by Claude Ménard and Elodie Bertrand

Ronald H. Coase was one of the most innovative and provocative economists of the twentieth century. Besides his best known papers on ‘The Nature of the Firm’ and ‘The Problem of Social Cost’, he had a major role in the development of the field of law and economics, and made numerous influential contributions to topics including public utilities, regulation and the functioning of markets. In this comprehensive Companion, 31 leading economists, social scientists and legal scholars assess the impact of his work with particular reference to the research programs initiated, the influence on policymakers, and the challenge to conventional perspectives.

Chapter 10: The holdup game

Richard R.W. Brooks

Subjects: economics and finance, history of economic thought, industrial organisation, institutional economics, law and economics, law - academic, law and economics


“Holdup” long ago entered common usage as a description of forcible robbery, typically of travelers on rail or coach, characterized, perhaps apocryphally, by hands held up at gunpoint or knifepoint. By the early twentieth century the term had expanded in the American vernacular to include a form of lawful extortion. John Commons (1924: 59) used “holdup” to describe extreme cases of bargaining, bordering on immorality but not actually illegal. In 1934, William du Pont characterized a threat by the tight-knit Fisher brothers to leave General Motors en masse as “almost a hold up” (Freeland 2000: 58). Victor Goldberg (1976: 439) may be credited with reviving the term and ushering in its modern usage (expressing more formally the folk understanding known to Commons, Coase, and their contemporaries): Before locating its plants at a particular site, a firm will have a number of options [among suppliers], once the relationship has begun [however], the supplier will be isolated to some degree from competition and will be in a position to “hold up” the customer. Among economists presently, however, the classic citation to “holdup” is Klein et al. (1978) and, in particular, their account of Fisher Body holding up General Motors, which is the focus of this chapter.

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