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Ownership, Access, and Sequential Investment

Author

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  • Maxim Mai
  • Vladimir Smirnov
  • Andrew Wait

Abstract

We extend the propertyrights framework to allow for a separation of the ownership rights of access and veto and for sequential investment. Parties investing first do so before contracting is feasible. It is possible, however, that parties investing second can share (at least some of) their investment costs. Along with this costsharing effect, the incentive to invest is affected by a strategic effect generated by sequential investment. Together these effects can overturn some of the predictions of the propertyrights literature. For example, the most inclusive ownership structure might not be optimal, even if all investments are complementary.

Suggested Citation

  • Maxim Mai & Vladimir Smirnov & Andrew Wait, 2014. "Ownership, Access, and Sequential Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 203-231, February.
    • Handle: RePEc:cje:issued:v:47:y:2014:i:1:p:203-231
    DOI: 10.1111/caje.12071
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    Cited by:

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    2. Bel, Roland & Smirnov, Vladimir & Wait, Andrew, 2012. "On Broadway and strip malls: how to make a winning team," Working Papers 2012-14, University of Sydney, School of Economics.

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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