The name is absent



at most their outside options.

OPTIMAL OWNERSHIP ALLOCATION WITH NO COMPETITION

In this section we consider a situation with no competition between employees. The
optimal ownership allocations obtained in this case will serve as useful benchmarks to
understand the relation between competition and ownership analyzed in the next sections.
Thus, we shall consider a model here with one employee one customer and possibly one
outside owner and we shall ask which of them should own the asset or firm.

Before we address this question we shall consider what happens when the employee and
customer decide to transact on their own without using the asset or premises of the firm.
In this case the total ex post surplus from the transaction,
υ(k). is split equally between
the employee and the customer and the employ*ee chooses
к in stage 1 to maximize

1-fc∙                           (1)

and ends up underinvesting in human capital. Indeed, from a first-best perspective he
should set
к to maximize

u(k) - ⅛.

Now. suppose that the employee uses the firm's asset(sl to serve the customer. He is
then able to generate a total ex-post surplus of Vr(⅛) > ι∙(fc). For convenience, we shall
assume throughout this paper that
V (к) = /(υ(fc)), with f, > и and ʃ" ≤ v. Here, f, is
the marginal contribution of the firm assets to the marginal value of production. It can
be taken to be a measure of to the Complementaritjr between the firm's assets and the
employee s investment in human capital. More precisely, when
ff > 1 the firm’s asset is
complementary' to the employee's investment in human capital and consequently increases
the marginal value of the employee’s investment: and when
ff < 1, with the firm’s assets
the marginal value of the employee’s investment wi∏ be reduced.

The first-best when production takes place on the firm’s premises is for the employee
to set ⅛ to maximize
V(к) - к, and the first-best level of investment. .⅛∙ is given by:

V'(k*) ≈f'v,(k∙) = 1.

Obviously, the employee s first-best incentives to invest in human capital are then in-
creased if and only if
f, > 1 around k, where .⅛ solves ι∕(S) = 1.

What happens now in a second-best situation where human capital investment к is not
contractible? We first look at the case where :he firm is owned by a third party.



More intriguing information

1. Feature type effects in semantic memory: An event related potentials study
2. Multifunctionality of Agriculture: An Inquiry Into the Complementarity Between Landscape Preservation and Food Security
3. THE CHANGING STRUCTURE OF AGRICULTURE
4. The name is absent
5. A Unified Model For Developmental Robotics
6. Commitment devices, opportunity windows, and institution building in Central Asia
7. WP 36 - Women's Preferences or Delineated Policies? The development or part-time work in the Netherlands, Germany and the United Kingdom
8. Heterogeneity of Investors and Asset Pricing in a Risk-Value World
9. The name is absent
10. Ultrametric Distance in Syntax
11. The name is absent
12. The name is absent
13. The name is absent
14. The name is absent
15. Macroeconomic Interdependence in a Two-Country DSGE Model under Diverging Interest-Rate Rules
16. Estimated Open Economy New Keynesian Phillips Curves for the G7
17. Protocol for Past BP: a randomised controlled trial of different blood pressure targets for people with a history of stroke of transient ischaemic attack (TIA) in primary care
18. MICROWORLDS BASED ON LINEAR EQUATION SYSTEMS: A NEW APPROACH TO COMPLEX PROBLEM SOLVING AND EXPERIMENTAL RESULTS
19. Endogenous Determination of FDI Growth and Economic Growth:The OECD Case
20. ISO 9000 -- A MARKETING TOOL FOR U.S. AGRIBUSINESS