Two remarks on the property-rights literature

Eric Maskin, Jean Tirole

    Research output: Contribution to journalArticlepeer-review

    71 Scopus citations

    Abstract

    We first point out that the recent property-rights literature is based on three assumptions: (1) that contracts are always subject to renegotiation; (2) that the exercise of a property right confers a private benefit and (3) that parties are risk-neutral. Building on Hart-Moore (1999), we provide conditions under which an optimal contract consists of nothing more than an assignment of property rights. We also examine the robustness of some of the literature's standard predictions about asset ownership to the introduction of mechanisms for eliciting parties' ex post willingness to pay for the assets (such as options or financial markets). To illustrate the issue, we revisit the Hart-Moore (1990) proposition that joint ownership is suboptimal, and argue that ownership by a single party is dominated by joint ownership with put options.

    Original languageEnglish (US)
    Pages (from-to)139-149
    Number of pages11
    JournalReview of Economic Studies
    Volume66
    Issue number1
    DOIs
    StatePublished - Jan 1999

    ASJC Scopus subject areas

    • Economics and Econometrics

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