EconPapers    
Economics at your fingertips  
 

Incomplete Contracts, Limited Liability, and the Optimality of Joint Ownership

Patrick Schmitz

MPRA Paper from University Library of Munich, Germany

Abstract: The property rights approach to the theory of the firm is the most prominent application of the incomplete contracting paradigm. A central conclusion of the standard model says that joint ownership is suboptimal. In this note, we analyze a modified version of the standard model that is tailored to the organization of R&D activities, where one of the parties is wealth-constrained and protected by limited liability. It turns out that joint ownership can be optimal, since it avoids wasteful rent-seeking activities when limited liability rents are necessary to induce high effort. Our results are in line with the fact that R&D activities are often conducted in research joint ventures.

Keywords: property rights; incomplete contracts; limited liability; rent seeking; joint ownership (search for similar items in EconPapers)
JEL-codes: D23 D86 L24 O32 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/95637/1/MPRA_paper_95637.pdf original version (application/pdf)

Related works:
Journal Article: Incomplete contracts, limited liability, and the optimality of joint ownership (2019) Downloads
Working Paper: Incomplete Contracts, Limited Liability, and the Optimality of Joint Ownership (2019) Downloads
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:pra:mprapa:95637

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2020-04-10
Handle: RePEc:pra:mprapa:95637