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The Property-Rights Theory of the Firm with Endogenous Timing of Asset Purchase


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  • Ben Lockwood
  • David de Meza


The standard property-rights theory of the firm assumes that prior to investing in human capital, team members meet and negotiate asset ownership. This paper endogenizes the event sequence in a matching model of market equilibrium. Equilibria exist in which, for strategic and efficiency reasons, agents invest in human capital and buy assets prior to matching and simple ownership arrangements are chosen. As in the original work, ownership of physical assets affects the incentive to invest. However, in this setting ownership creates rent shifting, search and asset transfer advantages, so new results emerge. It is no longer necessarily true that key agents own. As for the form of integration, there may be multiple Pareto-rankable equilibria.

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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 364.

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Date of creation: Dec 1998
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Handle: RePEc:cep:stitep:364

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Keywords: Property rights; incomplete contracts; matching; asset ownership.;


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Cited by:
  1. Felli, Leonardo & Roberts, Kevin W S, 2002. "Does Competition Solve the Hold-up Problem?," CEPR Discussion Papers 3535, C.E.P.R. Discussion Papers.


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