Hold-up problem

Not only me, but my brother back in The Netherlands is also interested in economics. He did the major econometrics. My brother is 20 years older than me and therefore his study system was different than the study system nowadays, but nevertheless he had the opportunity to study abroad. He had chosen to stay home instead of going on an adventure in a new country.

When I talked to him about his decision, I asked what his reasons were when he made the decision not to go. He told me that it would cost a lot of money, which he didn’t had at that moment. Another reason why he didn’t want to go is that it wouldn’t be save in a different country. When you study abroad, there is a big change that you are going alone without any friends. You will end up in an environment that is unfamiliar and you are all by yourself. He considered that situation as unsafe. A third reason he mentioned was the language barriers. In The Netherlands it is usual to get English in high school, but you are not an expert in the language after your high school. He said that it would be hard to follow courses and make homework in English. Those three reasons made him decide to stay and to take more econometric courses at his home university.

I found the reasons that he mentioned in the conversation really interesting. It felt like there was another reason that he didn’t want to go, because his reasons can be easily refuted. First of all, the money could be borrowed from the government. Second, the university wouldn’t send students to unsafe places and when you go to a new university (especially when you will study abroad) you will make friends rapidly. At last, the language barrier is maybe there, but the professors will help you when you have a hard time understanding all the literature. Besides that, when you find the language hard, it is even better to go to a place where you have to speak it all the time. Those reason did my brother made up, because he was scared to get out of his comfort zone. He was just scared to go to step into a new financially situation, explore a new place and speak a new language.

He personally regrets his decision and he was stimulating me to do it. Since he is 40, his financial situation is better than a student like me. He really wanted me to study abroad and that was the reason why he helped me financially to make it possible. I personally thought I would be too work to study abroad that I was too lazy to take any effort. Since I had this conversation with my brother, he inspired me to go. He told me about his friends and about his regret. He helped me to figure out how to apply and he was excited to help me, since it felt for him that he did the thing that he regretted not to do.

The hold-up problem is a theory in economics about incomplete contracts. The two parties are efficient if they work together, but this I not happening because one of the parties hold up. This hold up is coming from concerns of the party and this makes the collaboration inefficient. This time there is only one party, my brother, but he had its concerns about studying abroad. He was afraid and therefore didn’t had the change to develop himself there. If would have been a special and unique change to challenge himself and learn a lot on different fields.