Incomplete Contracts, Property Rights and Endogenous Outside Options

Antonio Nicita () and Massimiliamo Vatiro ()
Authors registered in the RePEc Author Service: Massimiliano Vatiero ()

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: This paper extends the framework provided by the so-called GHM approach to a context of endogenous outside options, showing how the optimality of property rights assignment might be reversed. In some cases, non-owners could over-invest in specific assets while having mere access to property rights might not prevent hold-up. Our conclusions suggest that in order to reach the desired optimality features, the design of ownership structure should take into account the dynamics of outside options.

Keywords: outside options; property rights allocation; hold-up problem (search for similar items in EconPapers)
JEL-codes: L12 L22 L42 (search for similar items in EconPapers)
Date: 2008-10
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