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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.

Suggested Citation

  • Schmitz, Patrick W., 2007. "Joint Ownership and the Hold-up Problem Under Asymmetric Information," CEPR Discussion Papers 6478, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6478
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    Cited by:

    1. Schmitz, Patrick W., 2019. "Incomplete contracts, limited liability, and the optimality of joint ownership," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    2. Schmitz, Patrick W., 2013. "Investments in physical capital, relationship-specificity, and the property rights approach," Economics Letters, Elsevier, vol. 119(3), pages 336-339.
    3. Su, Alice Peng-Ju, 2017. "Information revelation in the Property Right Theory of the firms," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 133-164.
    4. Schmitz, Patrick W., 2021. "On the optimality of outsourcing when vertical integration can mitigate information asymmetries," Economics Letters, Elsevier, vol. 202(C).
    5. Müller, Daniel & Schmitz, Patrick W., 2016. "Transaction costs and the property rights approach to the theory of the firm," European Economic Review, Elsevier, vol. 87(C), pages 92-107.
    6. Schmitz, Patrick W., 2013. "Bargaining position, bargaining power, and the property rights approach," Economics Letters, Elsevier, vol. 119(1), pages 28-31.
    7. Valeria Gattai & Piergiovanna Natale, 2017. "A New Cinderella Story: Joint Ventures And The Property Rights Theory Of The Firm," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 281-302, February.
    8. Patrick W Schmitz, 2022. "How (Not) to Purchase Novel Goods and Services: Specific Performance Versus at-will Contracts," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2563-2577.
    9. Schmitz, Patrick W., 2023. "Completely relationship-specific investments, transaction costs, and the property rights theory," Economics Letters, Elsevier, vol. 226(C).
    10. Nicoletta Berardi & Paul Seabright, 2020. "Joint Ownership of Production Projects as a Commitment Device against Interest Groups," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 572-594.
    11. 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.
    12. Schmitz, Patrick W., 2023. "The proper scope of government reconsidered: Asymmetric information and incentive contracts," European Economic Review, Elsevier, vol. 157(C).
    13. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
    14. Gattai, Valeria & Natale, Piergiovanna, 2016. "Investment spillovers and the allocation of property rights," Economics Letters, Elsevier, vol. 145(C), pages 109-113.
    15. Hendrikse, George & Jiang, Tao, 2011. "An Incomplete Contracting Model of Dual Distribution in Franchising," Journal of Retailing, Elsevier, vol. 87(3), pages 332-344.
    16. Mori, Yusuke, 2020. "Ex ante investment, ex post adaptation, and joint ownership," Economics Letters, Elsevier, vol. 187(C).
    17. Kojun Hamada, 2017. "Incentive for innovation and the optimal allocation of patents," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 692-707, November.
    18. Brunnschweiler, Christa N. & Valente, Simone, 2013. "Property Rights, Oil and Income Levels: Over a Century of Evidence," MPRA Paper 52203, University Library of Munich, Germany.
    19. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.
    20. Kurt Annen, 2009. "Efficiency out of disorder: Contested ownership in incomplete contracts," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 597-610, December.

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    More about this item

    Keywords

    Investment incentives; Joint ownership; Property rights;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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