Title: When will Efficient Ownership Arise? Trading Over Property Rights
Abstract:The property rights theory of the firm considers environments where asset ownership matters for ex post bargaining and hence, drives the efficiency of ex ante non-contractible actions. This paper comp...The property rights theory of the firm considers environments where asset ownership matters for ex post bargaining and hence, drives the efficiency of ex ante non-contractible actions. This paper complements this analysis by considering what ownership structures would arise in market settings. Building on earlier results based on simple auction mechanisms for allocating asset ownership, this paper considers when asset re-sale and share trading might lead to an efficient ownership structure. It is demonstrated that if asset trades are restricted to be bilateral in nature, efficient ownership cannot be guaranteed and, in equilibrium, ownership may rest with inefficient outside parties. However, in settings where (i) multilateral payments can be made; (ii) there are sufficient opportunities for asset re-trading and (iii) outside parties themselves are active traders, efficient ownership will be the unique equilibrium outcome.Read More
Publication Year: 2004
Publication Date: 2004-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 2
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