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Reputation and allocation of ownership

Halonen, Maija (1995) Reputation and allocation of ownership. TE, 289. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Identification Number: 289

Abstract

We show that allocation of ownership matters even in a long-term relationship where problems of opportunism are less severe unless agents are very patient. Ownership structure is chosen to give the agents best incentives to cooperate. The optimal control structure of the static game restricts the gain from deviation to be the lowest but also the punishment will be minimal. The worst ownership structure of the one-shot game is good in the repeated setting because it provides the highest punishment but bad because the gain from deviation is also highest. We show that when investment costs are very elastic partnership and a hostage type solution arise in equilibrium. While when costs are moderately elastic the results of the one-shot game apply.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 1995 Maija Halonen
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 14 Jul 2008 11:08
Last Modified: 01 Oct 2010 09:11
URI: http://eprints.lse.ac.uk/id/eprint/19365

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