Partnership dissolution, complementarity, and investment incentives
AbstractPartnerships form in order to take advantage of complementary skills; however, new opportunities may arise that make some partners' skills useless. We analyse partnerships that anticipate possible dissolution under the most commonly advised and widely used dissolution rule known as 'buy--sell provision'. We find that this rule assures neither ex post efficient dissolutions nor ex ante efficient investments. We also discuss whether renegotiations, supplementing the buy--sell provision with the right to veto, or allowing the uninformed partner to set the dissolution price may restore efficiency, and whether pre-emptive requests for dissolution occur in equilibrium. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 62 (2010)
Issue (Month): 3 (July)
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
Other versions of this item:
- Jianpei Li & Elmar G. Wolfstetter, 2004. "Partnership Dissolution, Complementarity, and Investment Incentives," CESifo Working Paper Series 1325, CESifo Group Munich.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maria Angeles de Frutos & Thomas Kittsteiner, 2004.
"Efficient partnership dissolution under buy/sell clauses,"
Bonn Econ Discussion Papers
bgse1_2004, University of Bonn, Germany, revised Jul 2004.
- María-Angeles de Frutos & Thomas Kittsteiner, 2008. "Efficient partnership dissolution under buy-sell clauses," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 184-198.
- Kittsteiner, T. & De Frutos & M-A, 2004. "Efficient Partnership Dissolution under Buy/Sell Clauses," Econometric Society 2004 Latin American Meetings 314, Econometric Society.
- María Angeles de Frutos & Thomas Kittsteiner, 2006. "Efficient partnership dissolution under buy-sell clauses," Economics Working Papers we072816, Universidad Carlos III, Departamento de Economía.
- Banks, Jeffrey S. & Sobel, Joel., 1985.
"Equilibrium Selection in Signaling Games,"
565, California Institute of Technology, Division of the Humanities and Social Sciences.
- Kittsteiner, Thomas, 2000.
"Partnerships and Double Auctions with Interdependent Valuations,"
Sonderforschungsbereich 504 Publications
01-15, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Kittsteiner, Thomas, 2003. "Partnerships and double auctions with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 44(1), pages 54-76, July.
- Peter Cramton & Robert Gibbons & Paul Klemperer, 1987.
"Dissolving a Partnership Efficiently,"
Papers of Peter Cramton
87econ, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Comino, Stefano & Nicolò, Antonio & Tedeschi, Piero, 2010.
"Termination clauses in partnerships,"
European Economic Review,
Elsevier, vol. 54(5), pages 718-732, July.
- Stefano Comino & Antonio Nicolò & Piero Tedeschi, 2006. "Termination Clauses in Partnerships," Working Papers 20060505, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
- Stefano Comino & Antonio Nicolò & Piero Tedeschi, 2005. "Termination Clauses in Partnerships," Industrial Organization 0509007, EconWPA.
- Li, Jianpei, 2009. "Partnership Dissolution and Proprietary Information," MPRA Paper 12505, University Library of Munich, Germany.
- Bernhard Ganglmair, 2008. "Breakup of Repeat Transaction Contracts, Specific Investment, and Efficient Rent-Seeking," JEPS Working Papers 08-001, JEPS.
- John Turner, 2013. "Dissolving (in)effective partnerships," Social Choice and Welfare, Springer, vol. 41(2), pages 321-335, July.
- Jianpei Li & Yi Xue & Weixing Wu, 2013. "Partnership dissolution and proprietary information," Social Choice and Welfare, Springer, vol. 40(2), pages 495-527, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.