Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Bargaining, bonding, and partial ownership
AU - Dasgupta, Sudipto
PY - 2000/8
Y1 - 2000/8
N2 - This article provides a theory of interfirm partial ownership. We considera setting in which an upstream firm can make two alternative types of invest- ment: either specific investment that only a particular downstream firm can useor general investment that any downstream firm is capable of using. When thebenefits from specific and general investments are both stochastic, equity partic-ipation by the downstream firm in the upstream firm can lead to more efficient outcomes than take-or-pay contracts. The optimal ownership stake of the down-stream firm is less than 50 percent under a natural assumption about relative bargaining power.
AB - This article provides a theory of interfirm partial ownership. We considera setting in which an upstream firm can make two alternative types of invest- ment: either specific investment that only a particular downstream firm can useor general investment that any downstream firm is capable of using. When thebenefits from specific and general investments are both stochastic, equity partic-ipation by the downstream firm in the upstream firm can lead to more efficient outcomes than take-or-pay contracts. The optimal ownership stake of the down-stream firm is less than 50 percent under a natural assumption about relative bargaining power.
U2 - 10.1111/1468-2354.00078
DO - 10.1111/1468-2354.00078
M3 - Journal article
VL - 41
SP - 609
EP - 635
JO - International Economic Review
JF - International Economic Review
SN - 0020-6598
IS - 3
ER -