Uncharted Rights, Trade Execution, and Firm Boundaries: Delegating Quantum Computing

Abstract

We consider a dynamic model for the delegation of uncharted rights to private firms in which the agents produce homogenous goods and trade them in an exogenous market. The agents have homogenous production technology, there are no transfers, and the principal rearranges rights at no cost, the only distinction point is the utilization of a trading technology to execute trades optimally in the exogenous market. We apply our setting to revisit the theory of public and private partnership and the firm boundaries when the goal is to maximize the rights’ value in interaction with the exogenous market. We augment the basic model with information asymmetry and moral hazards and propose reference points to the residual rights as a potential method to control these agency problems.

Keywords: Incomplete contracts, trade execution, transaction costs, residual rights, competition structure

JEL Classification: D23, D40, D86, P14