Capital Assembly

Robert Akerlof and Richard Holden

The Journal of Law, Economics, and Organization, 2019, vol. 35, issue 3, 489-512

Abstract: This article explores the problem of assembling capital for projects. It can be difficult to assemble capital, when it is disaggregated, for a project that exhibits increasing returns. Small investors may be reluctant to participate, as they may question the ability of the project owner to raise the additional capital he requires. This suggests the possibility that agents with blocks of capital (capital that is already aggregated) might earn rents. Similarly, agents with “network capital”—that is, an ability to aggregate the capital of others—may earn rents. In this article, we develop a simple theory of capital assembly and discuss the implications for investment and rent distribution.

JEL-codes: D24 D30 G30 L26 (search for similar items in EconPapers)
Date: 2019
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