The cost of appropriation and firm boundaries

Yusuke Mori

Economics Letters, 2024, vol. 241, issue C

Abstract: This study introduces an appropriation cost (i.e., cost of requesting rent-seeking-oriented contract renegotiation) in the property-rights theory (PRT) model. We show that significant appropriation-cost economization within a firm leads to the optimality of non-integrated structures, including joint ownership.

Keywords: Incomplete contracts; Rent-seeking theory; Hold-up problem; Property-rights theory; Internal organization (search for similar items in EconPapers)
JEL-codes: D23 L22 M21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524003008

DOI: 10.1016/j.econlet.2024.111816

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