Fairness and the Optimal Allocation of Ownership Rights

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20,
2004We report on several experiments on the optimal allocation of
ownership rights. The experiments confirm the property rights
approach by showing that the ownership structure affects
relationship-specific investments and that the subjects achieve the
most efficient ownership allocation starting from different initial
conditions. However, in contrast to the property rights approach,
the most efficient ownership structure is joint ownership. These
results are neither consistent with the self-interest model nor
with models that assume that all people behave fairly, but they can
be explained by the theory of inequity aversion that focuses on the
interaction between selfish and fair players.