Schmitz, Patrick W. (2013): Investments in physical capital, relationship-specificity, and the property rights approach.
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Abstract
We reconsider the property rights approach to the theory of the firm based on incomplete contracts. We explore the implications of different degrees of relationship-specificity when there are two parties, A and B, who can make investments in physical capital (instead of human capital). If relationship-specificity is exogenously given, it turns out that joint asset ownership can be optimal only if the degree of relationship-specificity is sufficiently small. If relationship-specificity can be freely chosen and if party A's investments are more productive, then the parties deliberately choose a strictly positive level of relationship-specificity and they always agree on sole ownership by party A.
Item Type: | MPRA Paper |
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Original Title: | Investments in physical capital, relationship-specificity, and the property rights approach |
Language: | English |
Keywords: | ownership, incomplete contracts, relationship-specificity, theory of the firm, investment incentives |
Subjects: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out ; Joint Ventures ; Technology Licensing M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics |
Item ID: | 45243 |
Depositing User: | Patrick W. Schmitz |
Date Deposited: | 19 Mar 2013 21:44 |
Last Modified: | 02 Oct 2019 12:16 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/45243 |