Logo
Munich Personal RePEc Archive

Asymmetric Information and the Property Rights Approach to the Theory of the Firm

Schmitz, Patrick W. (2017): Asymmetric Information and the Property Rights Approach to the Theory of the Firm. Published in: Economics Letters , Vol. 159, (2017): pp. 96-99.

[thumbnail of MPRA_paper_91460.pdf] PDF
MPRA_paper_91460.pdf

Download (229kB)

Abstract

In the Grossman-Hart-Moore property rights approach to the theory of the firm, it is usually assumed that information is symmetric. Ownership matters for investment incentives, provided that investments are partly relationship-specific. We study the case of completely relationship-specific investments (i.e., the disagreement payoffs do not depend on the investments). It turns out that if there is asymmetric information, then ownership matters for investment incentives and for the expected total surplus. Specifically, giving ownership to party B can be optimal, even when only party A has to make an investment decision and even when the owner's expected disagreement payoff is larger under A-ownership.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.