Information revelation in the Property Right Theory of the firms

Alice Peng-Ju Su

International Journal of Industrial Organization, 2017, vol. 52, issue C, 133-164

Abstract: I incorporate revelation of asymmetric information through shared ownership (partnership) into the Property Right Theory of the firms. Shared ownership is optimal as a joint result of mitigating hold-up and inducing truthful information revelation. Due to the incomplete contracting nature, shared ownership is incentive compatible if it induces truthful information revelation within the relationship as well as when the relationship breaks. Off-the-equilibrium-path incentive compatibility results in the optimality of partnership even for the most efficient type of the informed party. Inefficient investment thus arises. The level of shared ownership depends on the relative magnitude of the information rent effect and the hold-up effect. Shared ownership is robust to semi-truthful information revelation, under which hold-up occurs in equilibrium with an endogenously determined probability related to the revelation strategy.

Keywords: Information revelation; Hold-up; Property Right Theory; Shared ownership (search for similar items in EconPapers)
JEL-codes: D23 D82 D86 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718716301473
Full text for ScienceDirect subscribers only

Related works:
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:eee:indorg:v:52:y:2017:i:c:p:133-164

DOI: 10.1016/j.ijindorg.2017.02.004

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().