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Dissolving a Partnership Efficiently

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  • Cramton, Peter
  • Gibbons, Robert
  • Klemperer, Paul

Abstract

Several partners jointly own an asset that may be traded among them. Each partner has a valuation for the asset. The valuations are known privately and drawn independently from a common probability distribution. The authors characterize the set of all incentive- compatible and interim individually-rational trading mechanisms, and give a simple necessary and sufficient condition for such mechanisms to dissolve the partnership ex post efficiently. A bidding game is constructed that achieves such dissolution whenever it is possible. Despite incomplete information about the valuation of the asset, a partnership can be dissolved ex post efficiently provided no single partner owns too large a share. Copyright 1987 by The Econometric Society.

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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 55 (1987)
Issue (Month): 3 (May)
Pages: 615-32

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Handle: RePEc:ecm:emetrp:v:55:y:1987:i:3:p:615-32

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  1. Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Thomas A. Gresik & Mark A. Satterthwaite, 1985. "The Rate At Which a Simple Market Becomes Efficient as the Number of Traders Increases: An Asymptotic Result for Optimal Trading Mechanisms," Discussion Papers 708, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  4. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  5. Wilson, Robert B, 1985. "Incentive Efficiency of Double Auctions," Econometrica, Econometric Society, vol. 53(5), pages 1101-15, September.
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