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Article
Markets for Ownership
RAND Journal of Economics (2005)
  • Joshua S Gans
Abstract

The prevailing theory of the firm demonstrates that ownership by dispensable, outside parties is inefficient relative to ownership by productive agents. To better understand observed patterns of ownership, this paper analyzes markets for ownership, demonstrating that outside parties will often become asset owners. Outside parties only earn rents from ownership whereas productive agents can earn rents even as non-owners. Given that their contribution is complementary with other productive agents this mutes their willingness to pay for ownership relative to outsiders. The main conclusion is that the nature of ownership markets stands alongside incentives as an important predictor of firm boundaries.

Keywords
  • ownership,
  • outside parties,
  • firm boundaries,
  • incomplete contracts,
  • resale
Disciplines
Publication Date
May, 2005
Citation Information
Joshua S Gans. "Markets for Ownership" RAND Journal of Economics Vol. 36 Iss. 2 (2005)
Available at: http://works.bepress.com/joshuagans/7/