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Efficient Dissolution of Partnerships and the Structure of Control

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  • John L. Turner
  • Emanuel Ornelas

Abstract

In this paper, we study efficient dissolution of partnerships in a context of incomplete information. We generalize the results of Cramton, Gibbons and Klemperer (1987) to situations where the partnership takes on a common value that may depend upon all partners' types, so that each partner's individual rationality constraint depends on types other than his own. We show that in this case not only the distribution of ownership, emphasized in the earlier literature, but also the distribution of control within an organization matter in determining the possibility of efficient dissolution. We underscore this point by showing that two-person partnerships where one partner exercises complete control cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structure

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 286.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:286

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Keywords: Mechanism design; efficient trading; asymmetric control; partnerships;

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  1. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 37, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 158(1), pages 66-, March.
  3. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Preston McAfee, R., 1992. "Amicable divorce: Dissolving a partnership with simple mechanisms," Journal of Economic Theory, Elsevier, Elsevier, vol. 56(2), pages 266-293, April.
  6. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288817, October.
  8. HEGE, Ulrich & HAUSWALD, Robert, 2002. "Ownership and control in joint ventures: theory and evidence," Les Cahiers de Recherche 750, HEC Paris.
  9. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 1999. "Partnerships, Lemons and Efficient Trade," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 99-71, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  10. Cramton, Peter & Gibbons, Robert & Klemperer, Paul, 1987. "Dissolving a Partnership Efficiently," Econometrica, Econometric Society, Econometric Society, vol. 55(3), pages 615-32, May.
  11. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(4), pages 897-926, August.
  12. Philippe Jehiel & Ady Pauzner, 2006. "Partnership dissolution with interdependent values," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 1-22, 03.
  13. Steven R. Williams, 1999. "A characterization of efficient, bayesian incentive compatible mechanisms," Economic Theory, Springer, Springer, vol. 14(1), pages 155-180.
  14. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  15. Gresik, Thomas A. & Satterthwaite, Mark A., 1989. "The rate at which a simple market converges to efficiency as the number of traders increases: An asymptotic result for optimal trading mechanisms," Journal of Economic Theory, Elsevier, Elsevier, vol. 48(1), pages 304-332, June.
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Citations

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Cited by:
  1. Philippe Jehiel & Benny Moldovanu, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 784828000000000490, UCLA Department of Economics.
  2. Vasiliki Skreta & Nicolas Figueroa, 2008. "What to Put on the Table," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 08-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Daniel Ferreira & Emanuel Ornelas & John L. Turner, 2005. "Ownership Structure and the Market for Corporate Control," IBMEC RJ Economics Discussion Papers, Economics Research Group, IBMEC Business School - Rio de Janeiro 2005-09, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  4. Li, Jianpei, 2009. "Partnership Dissolution and Proprietary Information," MPRA Paper 12505, University Library of Munich, Germany.
  5. Ludwig Ensthaler & Thomas Giebe & Jianpei Li, 2014. "Speculative partnership dissolution with auctions," Review of Economic Design, Springer, Springer, vol. 18(2), pages 127-150, June.
  6. Jianpei Li & Yi Xue & Weixing Wu, 2013. "Partnership dissolution and proprietary information," Social Choice and Welfare, Springer, Springer, vol. 40(2), pages 495-527, February.
  7. Ferreira, Daniel & Ornelas, Emanuel & Turner, John L., 2007. "Unbundling Ownership and Control," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6257, C.E.P.R. Discussion Papers.
  8. John Turner, 2013. "Dissolving (in)effective partnerships," Social Choice and Welfare, Springer, Springer, vol. 41(2), pages 321-335, July.

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