Asset Ownership and Contractability of Interaction

Bonn Economics Discussion Paper No. 12/2002

40 Pages Posted: 4 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: May 24, 2002

Abstract

In a property-rights framework, we study how the organizational form and quantity contracts interact in generating investment incentives. Our model nests standard property-rights and hold-up models as special cases. We admit general message-dependent contracts but provide conditions under which non-contingent contracts are optimal. This allows to fully characterize optimal contracts. First, we contribute to the foundation of the property-rights theory by characterizing under which circumstances its predictions are correct even when trade is contractible. Second, we study how the two incentive instruments interact in our symmetric information framework depending on the environment which is in the spirit of the multitasking literature. Finally, our model has implications for future empirical test of the property-rights theory.

Keywords: Property Rights, Incomplete Contracts, Specific Investments

JEL Classification: D23, D82, L14, L22

Suggested Citation

Roider, Andreas, Asset Ownership and Contractability of Interaction (May 24, 2002). Bonn Economics Discussion Paper No. 12/2002, Available at SSRN: https://ssrn.com/abstract=338520 or http://dx.doi.org/10.2139/ssrn.338520

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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