IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v191y2021icp482-500.html
   My bibliography  Save this article

Ownership shares and choosing the best leader

Author

Listed:
  • Courey, Gabriel
  • Heywood, John S.
  • McGinty, Matthew

Abstract

This paper examines production by two unequal partners and asks if there exist agreed upon ownership shares that generate the joint payoff maximizing efforts. Given the inherent complementarity, we show that for given shares, joint payoff is greater in a sequential rather than a simultaneous effort game. Also, joint payoff is typically higher when the more productive partner exerts effort late and when shares differ by less than productivity. Yet, each partner desires to exert effort late creating an unavoidable chicken game. Given that the partners remain owners with shares, this creates demand for a coordinator (not a full principal) to establish optimizing shares and the leader.

Suggested Citation

  • Courey, Gabriel & Heywood, John S. & McGinty, Matthew, 2021. "Ownership shares and choosing the best leader," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 482-500.
    • Handle: RePEc:eee:jeborg:v:191:y:2021:i:c:p:482-500
    DOI: 10.1016/j.jebo.2021.09.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268121003899
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2021.09.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    2. Hubert Kempf & Grégoire Rota Graziosi, 2010. "Leadership in Public Good Provision: A Timing Game Perspective," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 763-787, August.
    3. Heintzelman, Martin D. & Salant, Stephen W. & Schott, Stephan, 2009. "Putting free-riding to work: A Partnership Solution to the common-property problem," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 309-320, May.
    4. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-653, October.
    5. Cressy, Robert, 2000. "Credit rationing or entrepreneurial risk aversion? An alternative explanation for the Evans and Jovanovic finding," Economics Letters, Elsevier, vol. 66(2), pages 235-240, February.
    6. Hermalin, Benjamin E, 1998. "Toward an Economic Theory of Leadership: Leading by Example," American Economic Review, American Economic Association, vol. 88(5), pages 1188-1206, December.
    7. Jungho Lee, 2020. "Estimating the benefits and costs of forming business partnerships," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 531-562, June.
    8. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
    9. Steffen Huck & Pedro Rey-Biel, 2006. "Endogenous Leadership in Teams," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(2), pages 253-261, June.
    10. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    11. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    12. Adams, Christopher P., 2006. "Optimal team incentives with CES production," Economics Letters, Elsevier, vol. 92(1), pages 143-148, July.
    13. Barmby, Tim & Sessions, John G. & Zangelidis, Alexandros, 2016. "Looking after number two? Competition, cooperation and workplace interaction," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 166-182.
    14. Kim, Jaesoo, 2012. "Endogenous leadership in incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 256-266.
    15. Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 131-171.
    16. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    17. Kevin Lang & Peter-John Gordon, 1995. "Partnerships as Insurance Devices: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 614-629, Winter.
    18. repec:wly:soecon:v:81:2:y:2014:p:474-488 is not listed on IDEAS
    19. Martin Gaynor & Paul Gertler, 1995. "Moral Hazard and Risk Spreading in Partnerships," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 591-613, Winter.
    20. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
    21. Leibowitz, Arleen & Tollison, Robert, 1980. "Free Riding, Shirking, and Team Production in Legal Partnerships," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 380-394, July.
    22. Heywood, John S. & McGinty, Matthew, 2012. "Scale economies, consistent conjectures and teams," Economics Letters, Elsevier, vol. 117(3), pages 566-568.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heywood, John S. & Li, Dongyang & Ye, Guangliang, 2023. "Private provision of price excludable public goods by rivals," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 291-307.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hattori, Keisuke & Yamada, Mai, 2023. "Closing the Psychological Distance: The Effect of Social Interactions on Team Performance," MPRA Paper 117042, University Library of Munich, Germany.
    2. Keisuke Hattori & Mai Yamada, 2020. "Effective Leadership Selection in Complementary Teams," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(4), pages 620-639.
    3. Jungho Lee, 2020. "Estimating the benefits and costs of forming business partnerships," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 531-562, June.
    4. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," Discussion Papers 07-048, Stanford Institute for Economic Policy Research.
    5. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 768-776, October.
    6. Matthew McGinty, 2014. "Strategic Incentives in Teams: Implications of Returns to Scale," Southern Economic Journal, John Wiley & Sons, vol. 81(2), pages 474-488, October.
    7. Keisuke Hattori & Mai Yamada, 2018. "Skill Diversity and Leadership in Team Production," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(2), pages 351-374, June.
    8. Chao, Hong & Croson, Rachel T.A., 2013. "An experimental comparison of incentive contracts in partnerships," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 78-87.
    9. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
    10. Grégoire ROTA-GRAZIOSI & Hubert KEMPF, 2009. "Leading and losing the tax competition race," Working Papers 200921, CERDI.
    11. Kim, Jaesoo, 2012. "Endogenous leadership in incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 256-266.
    12. Hubert Kempf & Grégoire Rota Graziosi, 2010. "Leadership in Public Good Provision: A Timing Game Perspective," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 763-787, August.
    13. Keisuke Hattori & Takahiro Kitamura, 2013. "Endogenous Timing in Strategic Environmental Policymaking," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(2), pages 199-215, June.
    14. Skarzhinskaya, E. & Tsurikov, V., 2021. "Endogenous Stackelberg leadership within a team. The coalition effect," Journal of the New Economic Association, New Economic Association, vol. 49(1), pages 53-79.
    15. Skarzhinskaya, E. & Tzurikov, V., 2023. "The endogenous formation of leadership in collective actions using the modified timing decisions algorithm," Journal of the New Economic Association, New Economic Association, vol. 61(4), pages 51-68.
    16. Nana Adrian & Marc M ller, 2019. "Partnerships with Asymmetric Information: The Benefit of Sharing Equally amongst Unequals," Diskussionsschriften dp1904, Universitaet Bern, Departement Volkswirtschaft.
    17. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
    18. Robert Butler & Liam J. A. Lenten & Patrick Massey, 2020. "Bonus incentives and team effort levels: Evidence from the “Field”," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(5), pages 539-550, November.
    19. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
    20. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2019. "Exclusive Data, Price Manipulation and Market Leadership," CESifo Working Paper Series 7853, CESifo.

    More about this item

    Keywords

    Joint production; Partnerships; Ownership shares; Effort timing; Strategic complementarity;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:191:y:2021:i:c:p:482-500. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.