PROPERTY-RIGHTS THEORY AND POSSIBILITIES OF CHOICE IN THE EASTERN-EUROPE .1.

The paper looks into the effects of two of four different institutional choices that have been tried on a large scale: the Soviet-type firm and the corporate firm. (The codetermining firm, and the labor-managed firm will be analyzed in the following part of the article.) The following premises underline the analysis: (1) all decisions in business firms are made by individual decision makers, (2) all decision makers have their own private ends, (3) the prevailing property rights affect the behavior of decision makers in specific and predictable ways. The method of analysis is simple and straightforward. First, we investigate the bundle of property rights that exists under various institutional arrangements; the specific rights in that bundle reveal the allocation of costs and rewards within the firm. Next, we determine the resultant incentive structures and their effects on the behavior of decision makers. Finally, we deduce the implied behavior of the firm and examine the analytical propositions yielded by the analysis against the broad facts of business experience.