On the Foundations of the Property Rights Theory of the Firm: Cooperative Investments and Message-Dependent Contracts

Andreas Roider

No 12/2000, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: The property-rights theory assumes that trade is non-contractible ex-ante and focusses exclusively on the allocation of property-rights. We derive foundations for this focus on property-rights by identifying scenarios where only one of the simple ownership structures is optimal even though trade is contractible. In these scenarios it is optimal: (1) not to sign a trade contract; (2a) to sign a partially enforced trade contract; (2b) such a combination of asset ownership and a trade contract might even achieve the first-best. For the purpose of identifying the optimal simple ownership structure, trade contracts can be neclected in scenarios (2a) and (2b).

Keywords: Incomplete Contracts; Property Rights; Specific Investments (search for similar items in EconPapers)
JEL-codes: D23 D82 L14 L22 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:122000

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