Asset Ownership and Contractibility of Interaction

In a property-rights framework, I study how organizational form and quantity contracts interact in generating investment incentives. The model nests standard property-rights and hold-up models as special cases. I admit general message-dependent contracts but provide conditions under which noncontingent contracts are optimal. First, the article contributes to the foundation of the property-rights theory: I characterize under which circumstances its predictions are correct when trade is contractible. Second, I study how the optimal use of the incentive instruments depends on the environment. Finally, the model offers a new perspective on the classic Fisher Body case and produces implications that are empirically testable.