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

U of Bonn, Economics Discussion Paper No. 12/2000

37 Pages Posted: 15 Jan 2003

See all articles by Andreas Roider

Andreas Roider

University of Regensburg - Department of Economics and Econometrics; IZA Institute of Labor Economics

Date Written: October 2000

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).

Keywords: Property Rights, Incomplete Contracts, Specific Investments

JEL Classification: D23, D82, L14, L22

Suggested Citation

Roider, Andreas, On the Foundations of the Property Rights Theory of the Firm: Cooperative Investments and Message-Dependent Contracts (October 2000). U of Bonn, Economics Discussion Paper No. 12/2000, Available at SSRN: https://ssrn.com/abstract=338501 or http://dx.doi.org/10.2139/ssrn.338501

Andreas Roider (Contact Author)

University of Regensburg - Department of Economics and Econometrics ( email )

Universitaetsstrasse 31
D-93040 Regensburg
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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