Joint Ownership and Incomplete Contracts: The Case of Perfectly Substitutable Investments

Stephanie Rosenkranz and Patrick Schmitz

No 2679, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Prominent results of the property rights approach based on incomplete contracts as outlined by Hart (1995) say that all ownership structures lead to underinvestment and that joint ownership cannot be optimal, provided that investments are strategic complements and affect human capital only. We show that in the case of perfectly substitutable investments these conclusions are still true in the static setting, even if investments are in physical capital. However, if the parties can invest and generate a surplus twice, then joint ownership may imply first-best investments in the first stage and can well be the optimal ownership structure.

Keywords: Incomplete contracts; Joint ownership (search for similar items in EconPapers)
JEL-codes: D23 L22 (search for similar items in EconPapers)
Date: 2001-02
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP2679 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Joint Ownership And Incomplete Contracts: The Case Of Perfectly Substitutable Investments (2004)
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:cpr:ceprdp:2679

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP2679

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().