Ownership, access and sequential investment
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.
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- Edella Schlager & Elinor Ostrom, 1992. "Property-Rights Regimes and Natural Resources: A Conceptual Analysis," Land Economics, University of Wisconsin Press, vol. 68(3), pages 249-262.
- Vladimir Smirnov & Andrew Wait, 2004.
"Hold-up and Sequential Specific Investments,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(2), pages 386-400, Summer.
- Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
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"Timing of Investments, Hold-up and Total Welfare,"
Department of Economics - Working Papers Series
808, The University of Melbourne.
- Harold Demsetz, 1996. "Ownership and Control: A Review," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 107-112.
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