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On the Foundations of the Property Rights Theory of the Firm: Cooperative Investments and Message-Dependent Contracts


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  • Andreas Roider



The property-rights theory assumes that trade is non-contractible ex-ante and focusses exclusively on the allocation of property-rights. We derive foundations for this focus on property-rights by identifying scenarios where only one of the simple ownership structures is optimal even though trade is contractible. In these scenarios it is optimal: (1) not to sign a trade contract; (2a) to sign a partially enforced trade contract; (2b) such a combination of asset ownership and a trade contract might even achieve the first-best. For the purpose of identifying the optimal simple ownership structure, trade contracts can be neclected in scenarios (2a) and (2b).

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse12_2000.

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Length: 26
Date of creation: Oct 2000
Date of revision:
Handle: RePEc:bon:bonedp:bgse12_2000

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Keywords: Incomplete Contracts; Property Rights; Specific Investments;

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