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4 results

  • 7 - Divided Ownership and Organization

  • Yoram Barzel, University of Washington, Douglas W. Allen, Simon Fraser University, British Columbia
  • Book:
    Economic Analysis of Property Rights
    Published online:
    17 August 2023
    Print publication:
    31 August 2023, pp 110-134

  • Summary

    When many individuals combine their inputs in production, common property problems arise. Often the use of low incentive wage contracts are necessary to mitigate overuse. However, such contracts mean that workers need direction from others. This is the seed of an organization. The central person in an organization must be able to bare the risks of their decisions, and so the owner of the organization is often the holder of the equity capital, which is used to convince others that they will not bear negative residuals.