When should one pay the ferryman? When to pay for the delivery of a good, and how should
one invest in a public good if there is a single transaction and institutions are costly? We
show how to solve the hold-up problem. The idea is to appropriately split up the desired total
contribution into several separate contributions that are made in sequence, with each party
threatening to discontinue if others deviate. Our solution concept is based on subgame
perfection, where players are either selfish and do not care about very small gains or are …