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Fairness and the Optimal Allocation of Ownership RightsErnst FehrUniversity of Zurich - Department of Economics Susanne KremhelmerUniversity of Munich - Department of Economics Klaus M. SchmidtLudwig-Maximilians-Universität Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR) May 2005 CESifo Working Paper Series No. 1467; IEW Working Paper No. 224 Abstract: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.
Number of Pages in PDF File: 34 Keywords: Ownership rights, double moral hazard, fairness, reciprocity, incomplete contracts JEL Classification: C7, C9, J3 working papers seriesDate posted: January 27, 2005Suggested CitationContact Information
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