Two remarks on the property-rights literature

We first point out that the recent property-rights literature is based on t hree assumptions: (1) that contracts are always subject to renegotiation; ( 2) that the exercise of a property right confers a private benefit and (3) that parties are risk-neutral. Building on Hart-Moore (1999), we provide co nditions under which an optimal contract consists of nothing more than an a ssignment of property rights. We also examine the robustness of some of the literature's standard predict ions about asset ownership to the introduction of mechanisms for eliciting parties' ex post willingness to pay for the assets (such as options or fina ncial markets). To illustrate the issue, we revisit the Hart-Moore (1990) p roposition that joint ownership is suboptimal, and argue that ownership by a single party is dominated by joint ownership with put options.