The standard property rights theory of the firm assumes asset ownership is decided by negotiation between managers prior to their choice of unverifiable investment. This paper endogenises the event sequence in a matching model of market equilibrium. Equilibria in which agents invest (in human capital) and buy assets prior to matching are shown to exist and so are immune to Maskin and Tirole's recent criticism that the simplest of ownership arrangements can be improved upon. The model preserves the central feature of the property rights theory, namely that ownership of physical assets affect the incentive to invest.
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Paper provided by University of Exeter, School of Business and Economics in its series Discussion Papers with number
98/07.
Length: Date of creation: 1998 Date of revision: Handle: RePEc:fth:exetec:98/07
Contact details of provider: Postal: School of Business and Economics University of Exeter Streatham Court Rennes Drive Exeter EX4 4PU Phone: (01392) 263218 Fax: (01392) 263242 Web page: http://www.exeter.ac.uk/sobe/ More information through EDIRC
Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
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