Munich Personal RePEc ArchiveProduction Complementarity and Investment Incentives: Does Asset Ownership Matter?AyseMumcuauthorThis paper analyzes the role of the initial allocation of ownership rights in transactions where parties make relationship-specific investments and contracts are incomplete. If there is high mutual dependence in production, the initial allocation of ownership rights is irrelevant. This result contrasts with Grossman and Hart (1986), who, using a similar model, obtain that the ownership rights should be allocated to minimize ex-ante inefficiencies in production and assets should be owned by the party whose investment is most productive. The critical element behind these two different results is that while Grossman and Hart (1986) model uses the Nash bargaining solution treating status quo payoffs as disagreement points, here they are treated as outside options. The model also shows that, when relevant, asset ownership may provide disincentive to invest.L22 - Firm Organization and Market StructureD23 - Organizational Behavior ; Transaction Costs ; Property Rights2006-05MPRA Paper

Copyright Agreement

1. The author hereby affirms that he or she accepts the editorial guidelines given at https://mpra.ub.uni-muenchen.de/information.html.

2. The author hereby grants to the University Library of the Ludwig-Maximilians-Universität (LMU) a non-exclusive licence to make the electronic version of the uploaded work publicly accessible through the "Munich Personal RePEc Archive" (MPRA) repository. This licence includes abstracts and metadata and is valid for the duration of the statutory protection period, without territorial limitation. The licence furthermore includes the right to replicate the work as required, especially for the purposes of including the work and/or abstracts and metadata in electronic databases and of employing digital or other transmission technology to make this data available to large numbers of users, using either services invoked by user request or services initiated by the repository, and encompassing all forms of transmission (cable, wireless, satellite etc.) and protocol (TCP/IP, http, ftp etc.).

3. This contract entitles the University Library to transfer the licence granted herein either partially or wholly to a third party and to grant non-exclusive rights to other repositories without requiring the authors explicit permission.

4. The author hereby affirms that no third-party rights are infringed by the electronic publication of the work and undertakes to indemnify the University Library of the LMU against any third-party claims relating to the infringement of copyright legislation or exclusive usage rights which may result from the publication of the work through the University Library repository. The author hereby undertakes to reimburse any charges resulting from a rights infringement caused by him or her.

5. In the event that the author is not the sole author of the work in question, he/she hereby declares that he/she has been empowered by his/her co-authors to grant the above-mentioned usage licence.

6. In the event that the person who is uploading the work in question is not the author of this work, he/she hereby declares that he/she has been empowered by the author(s) to grant the above-mentioned usage licence.

7. The author continues to retain the usage rights to his or her work and may also bestow these rights elsewhere provided this does not curtail the rights granted to the University Library of the LMU in this declaration.

Clicking on the deposit button below indicates your agreement to these terms.

As the submission cannot be modified once it is accepted, please submit only if you are absolutely sure that no further changes are needed. Otherwise select the "Save for Later" button and review your submission. By doing so, nothing you have entered will be lost and you can resume your submission any time in the future.