My latest paper (with Cason and Zubrickas) has just been published by the Journal of Urban Economics. We show that refund bonuses can indeed improve the holdout problem.

Abstract: The holdout problem presents a pervasive challenge in situations that require the assembly of independently controlled assets, where due to complementarity the combined whole is worth more than the sum of its parts. One avenue for addressing holdout problems involves contingent contracts, where agreements are conditional upon reaching a predetermined threshold. This paper reports an experiment to investigate a new refund bonus contingent mechanism, in which asset owners who agree to participate (e.g., sell their asset) receive a bonus payment if the required threshold for project success is not met. The refund bonus eliminates failure equilibria and improves the frequency of successfully reaching the threshold in the symmetric mixed strategy equilibrium. In the experiment, individual asset holders choose each round whether to accept an offer to sell. Multiple owners must accept for the (contingent) sale to materialize, and holdout owners who do not sell can earn more, so the game has the strategic incentives of a volunteer’s dilemma. The data show that the bonus mechanism increases agreements to sell, the frequency of successful projects, and efficiency. By the second half of the experimental sessions, the total number of sales is 35 percent higher and the threshold is met nearly twice as often with the bonus than without.

I also cover this paper in my Refund Bonus (aka Dominant Assurance Contract) Explainer.