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Fairness and the optimal allocation of ownership rights

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  • Fehr, Ernst
  • Kremhelmer, Susanne
  • Schmidt, Klaus M.

Abstract

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results cannot be explained by the self-interest model nor by models that assume that all people behave fairly but they are largely consistent with approaches that focus on the interaction between selfish and fair players.

Suggested Citation

  • Fehr, Ernst & Kremhelmer, Susanne & Schmidt, Klaus M., 2008. "Fairness and the optimal allocation of ownership rights," Munich Reprints in Economics 20626, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:20626
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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