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Competing for Ownership

  • Legros, Patrick
  • Newman, Andrew

We provide a simple framework for analysing how organizations are designed in a competitive economy. We focus on the allocation of rights of control and show that in the presence of liquidity constraints, transferring authority can serve as an effective means of transferring surplus, although this may entail some efficiency loss. The efficiency and organizational structure of a typical firm will depend on the liquidity of the ‘marginal’ agent in the market and not just on the liquidity and technology of the members of the firm. Liquidity changes in a small fraction of the population can lead to restructuring of ownership throughout the economy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2573.

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Date of creation: Oct 2000
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Handle: RePEc:cpr:ceprdp:2573
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  1. Benito Arruñada & Luis Garicano & Luis Vázquez, 1999. "Contractual allocation of decision rights and incentives: The case of automobile distribution," Economics Working Papers 424, Department of Economics and Business, Universitat Pompeu Fabra.
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  27. Ramey Garey & Watson Joel, 2001. "Bilateral Trade and Opportunism in a Matching Market," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-35, November.
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  30. Dewatripont, Mathias & Tirole, Jean, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1027-54, November.
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