search query: @indexterm INVESTMENT INCENTIVES / total: 88
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Author: | Nöldeke, G. Schmidt, K. M. |
Title: | Sequential investments and options to own. |
Journal: | RAND Journal of Economics
1998 : WIN, VOL. 29:4, p. 633-653 |
Index terms: | Joint business ventures Corporate structure Investment incentives |
Language: | eng |
Abstract: | This article offers a new explanation for the use of contingent ownership structures. It considers a holdup problem in which two parties make relationship- specific investments sequentially to generate a joint surplus in the future. In this model the following ownership structure implements first-best investments: one party owns the firm initially, while the other party has the option to buy the firm at a set price at a later date. This result is robust to the possibility of renegotiation and uncertainty. |
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