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Fairness and the Optimal Allocation of Ownership Rights

Listed author(s):
  • Fehr, Ernst
  • Kremhelmer, Susanne
  • Schmidt, Klaus M.

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004We 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 the subjects achieve the most efficient ownership allocation starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 11.

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Date of creation: Jul 2004
Handle: RePEc:trf:wpaper:11
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  18. Hessel Oosterbeek & Joep Sonnemans & Susan van Velzen, 2003. "The need for marriage contracts: An experimental study," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(3), pages 431-453, 08.
  19. Pierre André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory: A Survey of Some Recent Work," CESifo Working Paper Series 738, CESifo Group Munich.
  20. Eric Maskin & Jean Tirole, 1999. "Two Remarks on the Property-Rights Literature," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 139-149.
  21. Nöldeke, Georg & Schmidt, Klaus M., 1997. "Sequential Investments and Options to Own," CEPR Discussion Papers 1645, C.E.P.R. Discussion Papers.
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  24. Gantner, Anita & Guth, Werner & Konigstein, Manfred, 2001. "Equitable choices in bargaining games with joint production," Journal of Economic Behavior & Organization, Elsevier, vol. 46(2), pages 209-225, October.
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