hold-up problem

The hold-up problem occurs when two parties collaborate on a project but become hesitant to invest fully because, after making investments, one party might renegotiate or change terms to their advantage. This risk arises because the investments are often specific to that partnership and difficult to recover if the relationship ends. As a result, the parties may under-invest or avoid cooperation altogether, fearing unfair treatment or loss, which can reduce overall productivity and the benefits of working together.