On the Role of Investments and the Nature of Residual Control Rights

Posted: 7 Mar 2015

See all articles by Massimiliano Vatiero

Massimiliano Vatiero

University of Trento - Department of Economics and Management; Università della Svizzera italiana

Date Written: March 6, 2015

Abstract

Using the transaction as originally formulated by John R. Commons as the unit of analysis (Oliver Williamson recognizes that Commons’ notion of transaction is the basic unit of analysis of transaction cost economics), in this paper I show three results: (i) how specific investments can be a safeguard from, rather than the cause of, opportunistic behaviors, (ii) if and when residual control rights can reduce, rather than increase, incentives to invest, and (iii) why the standard definition of residual control right as right in personam is too narrow.

Keywords: Incomplete contracts, Residual Control Rights, Specific Investments, Endogenous Outside Options

JEL Classification: D23, L12, L14, L21, L22, L42

Suggested Citation

Vatiero, Massimiliano, On the Role of Investments and the Nature of Residual Control Rights (March 6, 2015). Available at SSRN: https://ssrn.com/abstract=2574488 or http://dx.doi.org/10.2139/ssrn.2574488

Massimiliano Vatiero (Contact Author)

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

Università della Svizzera italiana ( email )

Via Giuseppe Buffi 13
Lugano, Ticino 6900
Switzerland

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