On the Choice Between Such Simple Mechanisms as Individual Ownership and the First-come First-serve Rule When Renegotiation is Costly

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    Abstract

    This article compares a set of often used simple contracts or mechanismsin terms of how well they allocate decision rights between twoagents over time. A basic assumption is that agents incur a fixed costeach time they renegotiate. The contracts or mechanisms studied are:individual ownership and authority, the first-come first-serve rule, the alternating rule and the sign-up rule. One trade-off that arises is thefollowing: when usage of the asset is flexible in the sense that it doesnot matter in which period it occurs, agents may rely on obtaining theasset through arriving first at some point, while when an agent needs totime and plan the use of the asset, he or she may wish to hold strongerrights or to use the sign-up rule as a simple form of contracting. (JEL:D10, D23, L22); Keywords: Incomplete contracts, individual ownership,first-come first-serve rule, costly renegotiation.
    Original languageEnglish
    Place of PublicationKøbenhavn
    Number of pages31
    Publication statusPublished - 2004

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