Termination and Coordination in Partnerships
AbstractIt is common practice for firms to pool their expertise by forming partnerships such as joint ventures and strategic alliances. A central organization problem in such partnerships is that managers may behave noncooperatively in order to advance the interests of their parent firms. We ask whether contracts can be designed so that managers will maximize total profits. We characterize first best contracts for a variety of environments and show that efficiency imposes some restrictions on the ownership shares. In addition, we evaluate the performance of two termination contracts that are widely used in practice: the shotgun rule and price competition. We find that although these contracts do not achieve full efficiency, they both perform well. We provide insight into when each rule is more efficient. Copyright (c) 1999 Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 8 (1999)
Issue (Month): 2 (06)
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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/
Other versions of this item:
- D20 - Microeconomics - - Production and Organizations - - - General
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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- Chong-En Bai & Zhigang Tao & Changqi Wu, 2004.
"Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(2), pages 277-305, Summer.
- Chong-En Bai & Zhigang Tao & Changqi Wu, 2003. "Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures.," William Davidson Institute Working Papers Series 2003-563, William Davidson Institute at the University of Michigan.
- Brooks, Richard & Landeo, Claudia & Spier, Kathryn, 2009.
"Trigger Happy or Gun Shy? Dissolving Common-Value Partnerships with Texas Shootouts,"
2009-1, University of Alberta, Department of Economics, revised 01 Jul 2013.
- Richard R. W. Brooks & Claudia M. Landeo & Kathryn E. Spier, 2010. "Trigger happy or gun shy? Dissolving common-value partnerships with Texas shootouts," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 649-673.
- MAULEON, Ana & SEMPERE-MONERRIS, Jose & VANNETELBOSCH, Vincent, 2013. "Contractually stable alliances," CORE Discussion Papers 2013031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jianpei Li & Yi Xue & Weixing Wu, 2013. "Partnership dissolution and proprietary information," Social Choice and Welfare, Springer, vol. 40(2), pages 495-527, February.
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