Efficient Partnership Dissolution under Buy/Sell Clauses
AbstractWhen a partnership comes to an end partners have to determine the terms of the dissolution. A well known way to do so is by enforcing a buy/sell option. Under its rules one partner has to offer a price for the partnership and the other agent can choose whether she wants to sell her share or buy her partner's share at this price. It is well known that in a model with private valuations this dissolution rule may generate inefficient allocations. However, we here show that if partners negotiate for the advantage of being chooser, then this buy/ sell provision results in an ex-post efficient outcome. This result helps to explain why such provisions are so widely introduced in partnership contracts
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Date of creation: 11 Aug 2004
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mechanism design; partnerships;
Other versions of this item:
- 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.
- María Angeles de Frutos & Thomas Kittsteiner, 2006. "Efficient partnership dissolution under buy-sell clauses," Economics Working Papers we072816, Universidad Carlos III, Departamento de Economía.
- 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.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-30 (All new papers)
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