Information Gathering, Transaction Costs, and the Property Rights Approach

Patrick Schmitz

American Economic Review, 2006, vol. 96, issue 1, 422-434

Abstract: The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post inefficiencies. In the present paper, a party may invest and acquire private information about the default payoff that it can realize on its own. Inefficient rent seeking can overturn prominent implications of the property rights theory. In particular, ownership by party B may be optimal, even though only the indispensable party A makes an investment decision.

Date: 2006
Note: DOI: 10.1257/000282806776157722
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (123)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/000282806776157722 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Information Gathering, Transaction Costs and the Property Rights Approach (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:96:y:2006:i:1:p:422-434

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().