Equal Sharing Rules in Partnerships
AbstractPartnerships are the prevalent organizational form in many industries. Profits are most frequently shared equally among the partners. The purpose of our paper is to provide a rationale for equal sharing rules. We show that with inequity-averse partners the equal sharing rule is the unique sharing rule that maximizes the partners' incentives to exert effort. We further show that inequity aversion can enhance efficiency in partnerships of given size, but that it can also cause partnerships to be inefficiently small.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 166 (2010)
Issue (Month): 2 (June)
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Other versions of this item:
- Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 217, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Papers in Economics 2027, University of Munich, Department of Economics.
- D20 - Microeconomics - - Production and Organizations - - - General
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
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