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Bargaining position, bargaining power, and the property rights approach

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  • Schmitz, Patrick W.

Abstract

In the property rights approach to the theory of the firm (Hart, 1995), parties bargain about whether or not to collaborate after non-contractible investments have been made. Most contributions apply the regular Nash bargaining solution. We explore the implications of using the generalized Nash bargaining solution. A prominent finding regarding the suboptimality of joint ownership turns out to be robust. However, in contrast to the standard property rights model, it may well be optimal to give ownership to a party whose investments are less productive, provided that this party's ex-post bargaining power is relatively small.

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  • Schmitz, Patrick W., 2013. "Bargaining position, bargaining power, and the property rights approach," MPRA Paper 44953, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:44953
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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    Cited by:

    1. Rosete, Alfredo, 2016. "Property, Possession, Incorporation: Another Look at Agribusiness Venture Agreements in the Philippines," UMASS Amherst Economics Working Papers 2016-09, University of Massachusetts Amherst, Department of Economics.
    2. 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.
    3. Isye Susana Nurhasanah & Pieter Van den Broeck, 2022. "Towards a Sustainable Metamorphosis of a Small Island Tourism: Dynamizing Capacity Building, Alternating Governance Arrangements, and Emerging Political Bargaining Power," Sustainability, MDPI, vol. 14(12), pages 1-26, June.
    4. Avi Dor & William Encinosa & Kathleen Carey, 2020. "Hospital performance standards and medical pricing: The impact of information disclosure in cardiac care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 492-515, July.
    5. Ursino Giovanni, 2015. "Supply Chain Control: A Theory of Vertical Integration," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1831-1866, October.
    6. Ma, Meilin & Liu, Yunjuan, 2020. "Processor-Retailer Markup and Pricing Decision: Insights from the U.S. Beef Market 2011-16," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304350, Agricultural and Applied Economics Association.
    7. 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.
    8. Takaya Kubota & Shin’ya Okuda, 2023. "Allocation of decision rights among two parties with asymmetric bargaining powers in bidirectional open innovation," SN Business & Economics, Springer, vol. 3(6), pages 1-17, June.

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    More about this item

    Keywords

    ownership; incomplete contracts; bargaining; investment incentives;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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