Universität zu Köln

Schmitz, Patrick W. ORCID: 0000-0003-3461-5102 (2017). Incomplete contracts, shared ownership, and investment incentives. J. Econ. Behav. Organ., 144. S. 153 - 166. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1879-1751

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Abstract

Consider a partnership consisting of two symmetrically informed parties who may each own a share of an asset. It is ex post efficient that tomorrow the party with the larger valuation gets the asset. Yet, today the parties can make investments to enhance the asset's productivity. Contracts are incomplete, so today only the ownership structure can be specified, which may be renegotiated tomorrow. It turns out that shared ownership is often optimal. If the investments are embodied in the physical asset, it may be optimal that party B has a larger ownership share even when party A has a larger valuation and a better investment technology. When shared ownership is taken into account, joint ownership in the sense of bilateral veto power cannot be optimal, regardless of whether the investments are in human capital or in physical capital. (C) 2017 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Schmitz, Patrick W. UNSPECIFIED orcid.org/0000-0003-3461-5102 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-209017
DOI:	10.1016/j.jebo.2017.09.021
Journal or Publication Title:	J. Econ. Behav. Organ.
Volume:	144
Page Range:	S. 153 - 166
Date:	2017
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1879-1751
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language PUBLIC-PRIVATE PARTNERSHIPS; RESEARCH-AND-DEVELOPMENT; HOLD-UP PROBLEM; PROPERTY-RIGHTS; DEVELOPMENT ALLIANCES; INFORMATION; FIRM; INNOVATION; RENEGOTIATION; GOVERNMENT Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/20901