Dissolving (in)effective partnerships

This paper studies the problem of partnership dissolution in the context of asymmetric information. Past work shows that the initial share allocation, interdependence of partners' valuations, and asymmetric control all affect the possibility of efficient dissolution. In this paper, I show, in a...

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Bibliographic Details
Published inSocial choice and welfare Vol. 41; no. 2; pp. 321 - 335
Main Author Turner, John L.
Format Journal Article
LanguageEnglish
Published Berlin/Heidelberg Springer 01.07.2013
Springer-Verlag
Springer Nature B.V
Subjects
Allocative efficiency
Asymmetric information
Auctions
Bargaining
Collaboration
Cooperation
Cost efficiency
Economic efficiency
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Effectiveness
Efficiency decisions
Expected utility
Game Theory
Interdependence
International Political Economy
Joint ventures
Lotteries
Mechanism design
Negotiation
Original Paper
Partners
Public choice
Public Finance
Rent
Rents
Return on investment
Social and Behav. Sciences
Social Class
Social Policy
Social welfare
Spectrum allocation
Valuation
Effective Partnership
Bilateral Exchange
Efficient Dissolution
Informational Rent
Incentive Compatible Mechanism
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Summary:This paper studies the problem of partnership dissolution in the context of asymmetric information. Past work shows that the initial share allocation, interdependence of partners' valuations, and asymmetric control all affect the possibility of efficient dissolution. In this paper, I show, in a novel class of "cooperative" partnerships characterized by ex ante interdependence of valuations, that effectiveness is significantly more important than the initial share allocation. Intuitively, as the effectiveness of cooperation between partners (and thus partnership value) increases, the gains from dissolving decrease but the informational rents remain constant, so efficient dissolution is more difficult to achieve. For sufficiently high effectiveness, efficient dissolution is impossible for any initial share allocation. For sufficiently low effectiveness, however, efficient dissolution is possible for all initial share allocations. The possibility of efficient bargaining depends on the initial share allocation only for moderately effective partnerships.
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ISSN:0176-1714
1432-217X
DOI:10.1007/s00355-012-0690-2