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CONTROL ALLOCATION, REVENUE SHARING, AND JOINT OWNERSHIP*
Author(s) -
Wang Susheng,
Zhu Tian
Publication year - 2005
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2005.00350.x
Subject(s) - moral hazard , control (management) , revenue sharing , revenue , microeconomics , joint venture , business , joint (building) , economics , finance , incentive , commerce , architectural engineering , management , engineering
This article develops a two‐period double moral hazard model with incomplete contracting to explore the implication of a possible adverse effect of unilateral control on the optimal revenue sharing and control allocation in a joint venture. We identify conditions under which joint ownership and control become optimal when unilateral control gives the controlling party opportunities to inefficiently extract private benefits at the expense of the joint revenue. Moreover, this adverse consequence of control may also lead to the separation of share ownership and control, i.e., it may be optimal for the minority owner to have the control rights.