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Ownership, access and sequential investment

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  • Mai, Maxim
  • Smirnov, Vladimir
  • Wait, Andrew

Abstract

We 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.

Suggested Citation

  • Mai, Maxim & Smirnov, Vladimir & Wait, Andrew, 2011. "Ownership, access and sequential investment," Working Papers 2011-09, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/7862
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    References listed on IDEAS

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    Cited by:

    1. Smirnov, Vladimir & Wait, Andrew, 2016. "Technology, team production and incentives," Economics Letters, Elsevier, vol. 141(C), pages 91-94.
    2. Bel, Roland & Smirnov, Vladimir & Wait, Andrew, 2012. "On Broadway and strip malls: how to make a winning team," Working Papers 2012-14, University of Sydney, School of Economics.

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    More about this item

    Keywords

    property rights; access; veto; firm organization; sequential investment; holdup;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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