Working Paper: CEPR ID: DP3460
Authors: Matthias Blonski; Giancarlo Spagnolo
Abstract: We propose a general framework for analyzing and comparing ownership structures with respect to creating incentives for co-operative behavior (e.g. efficient investment) in long-run relationships. We generalize models by Garvey (1995), Halonen (2002), and Baker, Gibbons and Murphy (2002) and compare their results in the light of our theory, going in depth into the issue of renegotiation of ownership and strategies. We show that when agents are not restricted in their strategy choice, the short?term efficient ownership structure identified by Hart and Moore (1990) is not relational efficient ? i.e. does not maximize the set of discount factors under which efficient investment can be supported in equilibrium of the repeated game. Moreover, the relational efficient ownership structure is independent of what can be renegotiated: ownership, strategies, both or none.
Keywords: Theory of the Firm; Implicit Contracts; Incomplete Contracts; Vertical Integration; Noncontractual Relations; Ownership Structures; Supply Relations
JEL Codes: D23; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ownership structures (G32) | relational contracts (L14) |
| relational contracts (L14) | investment incentives (O31) |
| ownership structures (G32) | efficiency of investments (G31) |
| ownership structures (G32) | punishment phase after defection (C72) |
| renegotiation possibilities (C78) | punishment phase after defection (C72) |
| ownership structures (G32) | relational efficiency (D61) |
| renegotiation (C78) | optimal asymmetric strategies (C72) |
| optimal asymmetric strategies (C72) | efficient investments (D61) |