Team Production, Sequential Investments, and Stochastic Payoffs
AbstractThis paper investigates a team production problem where two parties invest sequentially to generate a joint surplus. We find that the first best can be implemented even if the investment return is highly uncertain. The optimal contract entails a basic dichotomy: it is a simple option contract if investments of both parties are substitutive, and a linear incentive contract if they are complementary. These arrangements can be interpreted in terms of asset ownership, and renegotiation arises in equilibrium after the first agent has invested.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 157 (2001)
Issue (Month): 3 (September)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Other versions of this item:
- Christoph Lülfesmann, 2000. "Team Production, Sequential Investments and Stochastic Payoffs," Bonn Econ Discussion Papers bgse6_2001, University of Bonn, Germany.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- Roland Kirstein & Robert Cooter, .
German Working Papers in Law and Economics
2005-1-1131, Berkeley Electronic Press.
- Kirstein, Roland & Cooter, Robert, 2003. "Anti-Sharing," CSLE Discussion Paper Series 2003-02, Saarland University, CSLE - Center for the Study of Law and Economics.
- Kirstein, Roland & Cooter, Robert, 2005. "Anti-Sharing," CSLE Discussion Paper Series 2005-03, Saarland University, CSLE - Center for the Study of Law and Economics.
- Kirstein, Roland, 2004. "Anti-Teilen in Teams," CSLE Discussion Paper Series 2004-04, Saarland University, CSLE - Center for the Study of Law and Economics.
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