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Ownership, Access, and Sequential Investment

Author

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  • Maxim Mai
  • Vladimir Smirnov
  • Andrew Wait

Abstract

We extend the property‐rights framework to allow for a separation of the ownership rights of access and veto and for sequential investment. Parties investing first do so before contracting is feasible. It is possible, however, that parties investing second can share (at least some of) their investment costs. Along with this cost‐sharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the property‐rights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary. Propriété, accès et investissement séquentiel. On développe le cadre d'analyse des droits de propriété en permettant une séparation des droits de propriété, d'accès et de véto, et l'investissement séquentiel. Les agents investissant d'abord le font avant que la contractualisation soit possible. Il est cependant possible pour les agents investissant en second lieu de partager (en partie tout au moins) leurs coûts d'investissement. En plus de cette possibilité de partage de coûts, l'incitation à investir est affecté par un effet stratégique engendré par l'investissement séquentiel. Ensembles ces deux effets peuvent entraîner le renversement de certaines prédictions dans la littérature sur les droits de propriété. Par exemple, la structure de propriété la plus inclusive peut ne pas être optimale, même si tous les investissements sont complémentaires.

Suggested Citation

  • Maxim Mai & Vladimir Smirnov & Andrew Wait, 2014. "Ownership, Access, and Sequential Investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 203-231, February.
    • Handle: RePEc:wly:canjec:v:47:y:2014:i:1:p:203-231
    DOI: 10.1111/caje.12071
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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