DP6478 Joint Ownership and the Hold-up Problem Under Asymmetric Information

Author(s): Patrick W. Schmitz
Publication Date: September 2007
Keyword(s): investment incentives, joint ownership, Property rights
JEL(s): D23, D82, D86
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6478

In the standard property rights approach to the theory of the firm, joint ownership cannot be optimal, because it induces smaller investments in human capital than ownership by a single party. This result holds under the assumption that bargaining is always ex post efficient due to symmetric information. However, joint ownership can be optimal if the parties have private information about the payoffs that they can realize on their own.