Information Gathering, Transaction Costs and the Property Rights Approach

No 5417, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post inefficiencies. In the present paper, a party may invest and acquire private information about the default payoff that it can realize on its own. Inefficient rent-seeking can overturn prominent implications of the property rights theory. In particular, ownership by party B may be optimal, even though only the indispensable party A makes an investment decision.

Keywords: Theory of the firm; Incomplete contracts; Ownership rights (search for similar items in EconPapers)
JEL-codes: D23 L14 L22 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-com and nep-fmk
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Citations: View citations in EconPapers (12)

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Journal Article: Information Gathering, Transaction Costs, and the Property Rights Approach (2006)
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