Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on...

We analyze allocation of foreign aid to different sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information coordination failure occurs. The donors may concentrate too much on the priority sectors leaving...

We introduce location choice for the public good in the property rights framework. We find that it can be optimal to separate location from ownership.

Focus (specialization) improves productivity but leads to more dependency and opens a door for holdup problems. We analyse how organizational design interacts with the allocation of ownership in minimizing the holdup problem. We identify a new cost of integration: inefficient organizational...

Besley and Ghatak (2001) show that a public good should be owned by the agent who values the public good the most — irrespective of technological factors. In this paper we relax their assumptions in a natural way by allowing the agents to be indispensable, and we show that the relative...