Co-specific investments, hold-up and self-enforcing contracts

This paper offers a general model of the hold-up problem when investments are co-specific. Agents are risk-neutral and there are no information asymmetries. Nash bargaining with outside options determines the division of the surplus arising from exchange, The model formally demonstrates that reciprocal exposure to specific assets achieved via the partial redistribution of specific investment costs to the potentially opportunistic party serves as a credible commitment to mutually advantageous exchange.