Property Enforcement as Organized Consent

This article develops and tests a theory of the institutionsthat make property rights viable, ensuring their enforcement,mobilizing the collateral value of assets, and promoting growth.In contrast to contractual rights, property rights are enforcedin rem, being affected only with the consent of the right holder.This ensures enforcement but is costly when multiple, potentiallycolliding rights are held in the same asset. Different institutionsreduce the cost of gathering consents to overcome this trade-offof enforcement benefits for consent costs: recording of deedswith title insurance, registration of rights, and even a regimenof purely private transactions. All three provide functionallysimilar services, but their relative performance varies withthe number of transactions, the risk of political opportunism,and regulatory consistency. The analysis also shows the rationalityof allowing competition in the preparation and support of privatecontracts while requiring territorial monopoly in recordingand registration activities, this to ensure independence andprotect third parties.     

Contractual Allocation of Decision Rights and Incentives: The Case of Automobile Distribution

We analyze empirically the allocation of rights and monetaryincentives in automobile franchise contracts. All of these contractssubstantially restrict the decision rights of dealers and grantmanufacturers extensive rights to specify and enforce dealers'duties. The allocation of decision rights and incentive intensitydiffers across brands, however. This variation is explainedby the incidence of moral hazard. In particular, when the costof dealer moral hazard is higher and the risk of manufactureropportunism is lower, manufacturers hold more rights to determinethe performance required from their dealers and to use mechanismssuch as monitoring, termination, and monetary incentives toensure that such performance is provided.     

Audit quality: attributes,private safeguards and the role of regulation

This article examines the private mechanisms used to safeguard quality in auditing, with a view to defining rules capable of facilitating the performance of market forces. An outline is given of a general theory of private quality assurance in auditing, based on the use of quasi-rents to self-enforce quality dimensions. Particular attention is paid to the role of fee income diversification as the key ingredient of private incentives for audit quality. The role of public regulation is then situated in the context defined by the presence of these safeguard mechanisms. This helps in defining the content of rules and the function of regulatory bodies in facilitating and strengthening the protective operation of the market. By making sense of the interaction between regulation, quality attributes and private safeguards, the analysis helps to evaluate the relative merits of different regulatory options.