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Joint Ownership and the Hold-up Problem Under Asymmetric Information

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  • Schmitz, Patrick W.

Abstract

In the standard property rights approach to the theory of the firm, joint ownership cannot be optimal, because it induces smaller investments in human capital than ownership by a single party. This result holds under the assumption that bargaining is always ex post efficient due to symmetric information. However, joint ownership can be optimal if the parties have private information about the payoffs that they can realize on their own.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6478.

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Date of creation: Sep 2007
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Handle: RePEc:cpr:ceprdp:6478

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Keywords: investment incentives; joint ownership; Property rights;

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References

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  1. Hart, Oliver & Moore, John, 1999. "Foundations of Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 115-38, January.
  2. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November.
  3. Stephanie Rosenkranz & Patrick W. Schmitz, 2004. "Joint Ownership And Incomplete Contracts: The Case Of Perfectly Substitutable Investments," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 56(1), pages 72-89, January.
  4. Rosenkranz, Stephanie & Schmitz, Patrick W., 2003. "Optimal allocation of ownership rights in dynamic R&D alliances," Games and Economic Behavior, Elsevier, vol. 43(1), pages 153-173, April.
  5. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  6. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  7. Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
  8. Schmitz, Patrick W., 2005. "Information Gathering, Transaction Costs and the Property Rights Approach," CEPR Discussion Papers 5417, C.E.P.R. Discussion Papers.
  9. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  10. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
  11. Aghion, Philippe & Tirole, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  13. Maija Halonen, 2002. "Reputation And The Allocation Of Ownership," Economic Journal, Royal Economic Society, vol. 112(481), pages 539-558, July.
  14. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  15. Rosenkranz, Stephanie & Schmitz, Patrick W., 1999. "Know-how disclosure and incomplete contracts," MPRA Paper 12533, University Library of Munich, Germany.
  16. Oliver Hart & John Moore, 2007. "Incomplete Contracts and Ownership: Some New thoughts," American Economic Review, American Economic Association, vol. 97(2), pages 182-186, May.
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Citations

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Cited by:
  1. Schmitz, Patrick W, 2013. "Bargaining position, bargaining power, and the property rights approach," CEPR Discussion Papers 9281, C.E.P.R. Discussion Papers.
  2. Kurt Annen, 2009. "Efficiency out of disorder: Contested ownership in incomplete contracts," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 597-610.
  3. Schmitz, Patrick W., 2013. "Investments in physical capital, relationship-specificity, and the property rights approach," Economics Letters, Elsevier, vol. 119(3), pages 336-339.
  4. Schmitz, Patrick W., 2001. "The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," MPRA Paper 12562, University Library of Munich, Germany.
  5. Schmitz, Patrick W., 2010. "Contractual solutions to hold-up problems with quality uncertainty and unobservable investments," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 807-816, September.
  6. Christa N. Brunnschweiler & Simone Valente, 2013. "Property Rights, Oil and Income Levels: Over a Century of Evidence," Working Paper Series 15613, Department of Economics, Norwegian University of Science and Technology.
  7. Schmitz, Patrick W., 2010. "On contractual solutions to hold-up problems with quality uncertainty and unobservable investments," MPRA Paper 23157, University Library of Munich, Germany.

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