The Implications of Sequential Investment in the Property Rights Theory of the Firm

In the property rights theory of the firm, control over assets (ownership) affords bargaining power in the case of re-negotiation, providing incentives for parties to make relationship specific investments. The models predict that property rights will be allocated so as to maximise surplus generated from investment. However, these models assume that investments are made simultaneously. In this thesis I extend the standard property-rights framework to allow for sequential investment; the model allows for two investment periods. If a party invests first (ex-ante), they sink their investment before any contracting is possible. The parties that invest second (ex-post) do so after some aspects of the project are tangible, so that they can contract on (at least some) of their investment costs. As well as being empirically relevant, sequencing has several important theoretical implications. First, if a party gets to invest second, then – ceteris paribus – it has a greater incentive to invest. Second, the investment of parties that invest first are affected by a more than one influence. Anticipating higher ex-post investment, they can have a greater incentive to increase their investments. However, higher ex-post investment leads to greater costs being borne by the ex-ante investors (via the cost sharing contracts); this reduces ex-ante incentives to invest. Overall either effect can dominate so that ex-ante investment can either increase or decrease as a result of sequential investment. Third, as noted, sequencing of investment provides the possibility to (partially) contract on ex-post investment and costs. This is an additional method of providing incentives to invest, beyond the allocation of property rights themselves. Consequently, ex-post investors can be protected (and be provided incentives to invest) via these contracts, whereas ex-ante investors –who can not contract on their investments at all – are more likely to require the protection of property rights (through the allocation of asset ownership). The addition of sequential investment alters some of the predictions of the standard models. For example, previously the literature found that if all assets are complements at the margin all agents should have access to all assets (Bel (2005)). However, when investment sequencing is possible, making a control structure more inclusive (increasing the number of agents who have access to assets) can reduce the incentives of the ex-ante investors, decreasing overall surplus; this is because increasing the property rights of ex-post investors increases the marginal costs borne by ex-ante investors, effectively reducing their claim on surplus, diminishing their incentives to invest. This result contradicts Bel (2005), and shows that even when all assets are complimentary at the margin allocating access rights can be detrimental to incentives. Furthermore, if assets are substitutes at the margin then transfer of assets from ex-ante investors to ex-post investors can increase ex-ante investment and surplus. This counter intuitive result can occur in the case when decreasing ex-post investment is necessary to provide an incentive to ex-ante investors to increase their investments.Discipline of Economic

Schwannoma of the Recurrent Laryngeal Nerve : A Rare Entity

Neurogenic tumors are the most common posterior mediastinal tumors in adults. Schwannomas originating from the recurrent laryngeal nerve are rare. The present study describes a 46-year-old man with a tumor in the left superior mediastinum. Because of the narrow relationship with the aorta and the left pulmonary artery, the tumor was excised by left-sided minithoracotomy. The tumor, a schwannoma, originated from and encased the left recurrent laryngeal nerve. Six months after surgery, the patient was free of recurrence without symptoms other than hoarseness. "Additional imaging by magnetic resonance imaging could raise the probability of a neurogenic origin of the mass, eventually leading to collaboration with the neurosurgeon in this case.