Fairness and the Optimal Allocation of Ownership Rights

Fehr, Ernst; Kremhelmer, Susanne und Schmidt, Klaus M. (July 2004): Fairness and the Optimal Allocation of Ownership Rights. SFB/TR 15 Discussion Paper No. 11

Abstract

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004We 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 the subjects achieve the most efficient ownership allocation 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.

• Item Type: Paper
• Keywords: Ownership Rights, Double Moral Hazard, Fairness, Reciprocity, Incomplete Contracts
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A4 - Unvollständige Verträge, Marktinteraktion und soziale Vergleichsprozesse; Economics; Economics > Chairs > Seminar for Economic Theory
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C7, C9, J3
• Language: English