Template-Type: ReDIF-Paper 1.0
Title: Team Production, Sequential Investments and Stochastic Payoffs
Author-Name: Christoph Lülfesmann
Classification-JEL: D23, K12, L23
Keywords: Team Production, Asset Ownership, Sequential Investments
Abstract: 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. 
Note: 
Length: 15
Creation-Date: 2000-10
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse6_2001.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse6_2001