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Strategyproof Profit Sharing in Partnerships: Improving upon Autarky

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Author Info
Leroux, Justin (Rice U)

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Abstract

Several producers decide to form a partnership, to which they contribute both capital and labor. We propose a group-strategyproof mechanism under which no single agent is tempted to secede from the partnership: the inverse marginal product proportions (or IMPP) mechanism. The IMPP mechanism combines aspects of common ownership with the requirement that private property rights be respected: when an agent decides to stop exploiting her own capital, the latter is shared between the remaining agents in proportion to the productivity of their own capital. The IMPP is in fact the only fixed-path method (as introduced in Friedman, 2002) to satisfy autarkic individual rationality; its path is uniquely determined by the capital contributions of the agents. Thus, our results provide one of the first economic motivation for the asymmetry of fixed-path methods.

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Paper provided by Rice University, Department of Economics in its series Working Papers with number 2005-05.

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Date of creation: Apr 2005
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Handle: RePEc:ecl:riceco:2005-05

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C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

References listed on IDEAS
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  1. McAfee, R Preston & McMillan, John, 1991. "Optimal Contracts for Teams," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 561-77, August. [Downloadable!] (restricted)
  2. Steven Tadelis & Jonathan Levin, 2004. "Profit Sharing and the Role of Professional Partnerships," 2004 Meeting Papers 156, Society for Economic Dynamics.
    Other versions:
  3. HervÊ Moulin, 1999. "Incremental cost sharing: Characterization by coalition strategy-proofness," Social Choice and Welfare, Springer, vol. 16(2), pages 279-320. [Downloadable!] (restricted)
  4. Weitzman, Martin L., 1974. "Free access vs private ownership as alternative systems for managing common property," Journal of Economic Theory, Elsevier, vol. 8(2), pages 225-234, June. [Downloadable!] (restricted)
  5. Friedman, Eric J., 2002. "Strategic properties of heterogeneous serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 145-154, November. [Downloadable!] (restricted)
  6. Sprumont, Yves, 1998. "Ordinal Cost Sharing," Journal of Economic Theory, Elsevier, vol. 81(1), pages 126-162, July. [Downloadable!] (restricted)
  7. Luis C. Corchón & M. Socorro Puy, 2002. "Existence and Nash implementation of efficient sharing rules for a commonly owned technology," Social Choice and Welfare, Springer, vol. 19(2), pages 369-379. [Downloadable!] (restricted)
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  8. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September. [Downloadable!] (restricted)
  9. Townsend, Ralph E, 1995. "Fisheries self-governance: corporate or cooperative structures?," Marine Policy, Elsevier, vol. 19(1), pages 39-45, January. [Downloadable!] (restricted)
  10. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July. [Downloadable!] (restricted)
  11. Salvador Barberà, 2001. "An introduction to strategy-proof social choice functions," Social Choice and Welfare, Springer, vol. 18(4), pages 619-653. [Downloadable!] (restricted)
  12. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Blackwell Publishing, vol. 46(2), pages 185-216, April. [Downloadable!] (restricted)
  13. Saijo, Tatsuyoshi, 1991. "Incentive compatibility and individual rationality in public good economies," Journal of Economic Theory, Elsevier, vol. 55(1), pages 203-212, October. [Downloadable!] (restricted)
  14. Shin, Sungwhee & Suh, Sang-Chul, 1997. "Double Implementation by a Simple Game Form in the Commons Problem," Journal of Economic Theory, Elsevier, vol. 77(1), pages 205-213, November. [Downloadable!] (restricted)
  15. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
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  1. Leroux, Justin, 2005. "Strategyproof Profit Sharing: A Two-Agent Characterization," Working Papers 2005-04, Rice University, Department of Economics. [Downloadable!]
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