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On the Foundations of the Property Rights Theory of the Firm: Cooperative Investments and Message-Dependent Contracts

Author

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  • Roider, Andreas

Abstract

The property-rights theory assumes that trade is non-contractible ex-ante and focusses exclusively on the allocation of property-rights. We derive foundations for this focus on property-rights by identifying scenarios where only one of the simple ownership structures is optimal even though trade is contractible. In these scenarios it is optimal: (1) not to sign a trade contract; (2a) to sign a partially enforced trade contract; (2b) such a combination of asset ownership and a trade contract might even achieve the first-best. For the purpose of identifying the optimal simple ownership structure, trade contracts can be neclected in scenarios (2a) and (2b).

Suggested Citation

  • Roider, Andreas, 2000. "On the Foundations of the Property Rights Theory of the Firm: Cooperative Investments and Message-Dependent Contracts," Bonn Econ Discussion Papers 12/2000, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:122000
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    More about this item

    Keywords

    Incomplete Contracts; Property Rights; Specific Investments;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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