Bargaining position, bargaining power, and the property rights approach

Patrick Schmitz

No 9281, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In the property rights approach to the theory of the firm (Hart, 1995), parties bargain about whether or not to collaborate after non-contractible investments have been made. Most contributions apply the regular Nash bargaining solution. We explore the implications of using the generalized Nash bargaining solution. A prominent finding regarding the suboptimality of joint ownership turns out to be robust. However, in contrast to the standard property rights model, it may well be optimal to give ownership to a party whose investments are less productive, provided that this party's ex-post bargaining power is relatively small.

Keywords: Bargaining; Incomplete contracts; Investment incentives; Ownership (search for similar items in EconPapers)
JEL-codes: C78 D23 D86 L23 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
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Citations: View citations in EconPapers (7)

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Journal Article: Bargaining position, bargaining power, and the property rights approach (2013)
Working Paper: Bargaining position, bargaining power, and the property rights approach (2013)
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