English, Article, Journal or magazine article edition: Team Production, Sequential Investments and Stochastic Payoffs Christoph Lülfesmann

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Bookmark: http://trove.nla.gov.au/version/52445
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Team Production, Sequential Investments and Stochastic Payoffs
Author
  • Christoph Lülfesmann
Physical Description
  • preprint
Notes
  • We investigate a team production problem where two parties sequentially invest to generate a joint surplus. In this framework, it is possible to implement the first best even if the investment return is highly uncertain. The optimal contract entails a basic dichotomy: it is a simple option contract if the investments of both parties are substitutive, and a linear incentive contract if they are complementary. These schemes can be interpreted in terms of asset ownership: for the case of substitutive investments, a conditional ownership structure is optimal while for complementary investments shared equity in combination with a bonus component renders efficiency feasible. In either case, the parties renegotiate the initial arrangement after the first party invested.
  • Team Production, Asset Ownership, Sequential Investments
  • RePEc:bon:bonedp:bgse6_2001
Language
  • English
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