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Efficient dissolution of partnerships and the structure of control

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  • Ornelas, Emanuel
  • Turner, John L.

Abstract

In this paper, we study efficient dissolution of partnerships in a context of incomplete information. We generalize the results of Cramton, Gibbons and Klemperer (1987) to situations where the partnership takes on a common value that may depend upon all partners' types, so that each partner's individual rationality constraint depends on types other than his own. We show that in this case not only the distribution of ownership, emphasized in the earlier literature, but also the distribution of control within an organization matter in determining the possibility of efficient dissolution. We underscore this point by showing that two-person partnerships where one partner exercises complete control cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structure

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 60 (2007)
Issue (Month): 1 (July)
Pages: 187-199

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Handle: RePEc:eee:gamebe:v:60:y:2007:i:1:p:187-199

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Preston McAfee, R., 1992. "Amicable divorce: Dissolving a partnership with simple mechanisms," Journal of Economic Theory, Elsevier, vol. 56(2), pages 266-293, April.
  2. Peter Cramton & Robert Gibbons & Paul Klemperer, 1985. "Dissolving a Partnership Efficiently," Working papers 406, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 66-, March.
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  5. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. HEGE, Ulrich & HAUSWALD, Robert, 2002. "Ownership and control in joint ventures: theory and evidence," Les Cahiers de Recherche 750, HEC Paris.
  8. Steven R. Williams, 1999. "A characterization of efficient, bayesian incentive compatible mechanisms," Economic Theory, Springer, vol. 14(1), pages 155-180.
  9. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
  11. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  12. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  13. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
  14. Gresik, Thomas A. & Satterthwaite, Mark A., 1989. "The rate at which a simple market converges to efficiency as the number of traders increases: An asymptotic result for optimal trading mechanisms," Journal of Economic Theory, Elsevier, vol. 48(1), pages 304-332, June.
  15. Philippe Jehiel & Ady Pauzner, 2006. "Partnership dissolution with interdependent values," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 1-22, 03.
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Citations

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Cited by:
  1. John Turner, 2013. "Dissolving (in)effective partnerships," Social Choice and Welfare, Springer, vol. 41(2), pages 321-335, July.
  2. Vasiliki Skreta & Nicolas Figueroa, 2007. "What to Put on the Table," Levine's Bibliography 843644000000000374, UCLA Department of Economics.
  3. Li, Jianpei, 2009. "Partnership Dissolution and Proprietary Information," MPRA Paper 12505, University Library of Munich, Germany.
  4. Jehiel, Philippe & Moldovanu, Benny, 2006. "Allocative and Informational Externalities in Auctions and Related Mechanisms," CEPR Discussion Papers 5558, C.E.P.R. Discussion Papers.
  5. Jianpei Li & Yi Xue & Weixing Wu, 2013. "Partnership dissolution and proprietary information," Social Choice and Welfare, Springer, vol. 40(2), pages 495-527, February.
  6. Daniel Ferreira & Emanuel Ornelas & John L. Turner, 2005. "Ownership Structure and the Market for Corporate Control," IBMEC RJ Economics Discussion Papers 2005-09, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  7. Ferreira, Daniel & Ornelas, Emanuel & Turner, John L., 2007. "Unbundling Ownership and Control," CEPR Discussion Papers 6257, C.E.P.R. Discussion Papers.

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