Political Ownership.

Political involvement in the operation of an enterprise, whether it is private or state owned, creates opportunities for interest groups to influence the allocation of resources. I analyze how the influence externality arising from the interest groups' lobby activity disables the Coase Theorem. Then I proceed to investigate how the allocation of property rights between a government and a group of private owners determines the equilibrium allocation of resources in a firm. In other words, I provide a theory of why ownership matters.