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Markets for Ownership

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  • Joshua S. Gans

    () (University of Melbourne)

Abstract

The prevailing theory of the firm demonstrates that ownership by dispensable, outside parties is inefficient relative to ownership by productive agents. To better understand observed patterns of ownership, I analyze markets for ownership, demonstrating that outside parties will often become asset owners. Outside parties earn rents only from ownership, whereas productive agents can earn rents even as nonowners. Given that their contribution is complementary with other productive agents, this mutes their willingness to pay for ownership relative to outsiders. The main conclusion is that the nature of ownership markets stands alongside incentives as an important predictor of firm boundaries.

Suggested Citation

  • Joshua S. Gans, 2005. "Markets for Ownership," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 433-455, Summer.
  • Handle: RePEc:rje:randje:v:36:y:2005:2:p:433-455
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    1. repec:bla:jecsur:v:31:y:2017:i:1:p:281-302 is not listed on IDEAS
    2. Driffield, Nigel & Mickiewicz, Tomasz & Temouri, Yama, 2016. "Ownership control of foreign affiliates: A property rights theory perspective," Journal of World Business, Elsevier, vol. 51(6), pages 965-976.
    3. Ilya Segal & Michael D.Whinston, 2012. "Property Rights," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), : The Handbook of Organizational Economics Princeton University Press.
    4. Thomas F. Hellmann & Veikko Thiele, 2012. "A Theory of the Firm based on Partner Displacement," NBER Working Papers 18495, National Bureau of Economic Research, Inc.
    5. 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.

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