Ownership, access and sequential investment
AbstractWe extend the property-rights framework to allow for: a separation of the ownership rights of access and veto; and sequential investment. Parties investing first (ex ante) do so before contracting is possible. Parties that invest second (ex post) can contract on (at least some) of their investment costs. Along with this cost-sharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the property-rights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary.
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Bibliographic InfoPaper provided by University of Sydney, School of Economics in its series Working Papers with number 2011-09.
Date of creation: Oct 2011
Date of revision:
property rights; access; veto; firm organization; sequential investment; holdup;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-BEC-2011-11-14 (Business Economics)
- NEP-IPR-2011-11-14 (Intellectual Property Rights)
- NEP-MIC-2011-11-14 (Microeconomics)
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