Holmstrom (1982) considered a group of agents who jointly produce some output and showed that if the agents are required to balance the budget then the first best, or Pareto efficient, allocation cannot be obtained as an equilbrium relative to any sharing rule. Recent research on risk-neutral partnerships, in both the deterministic and stochastic case, yields a more positive picture about the possibility of sustaining efficient outcomes as equilibria of partnership games.
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Paper provided by Department of Economics, Florida State University in its series Working Papers with number
1997_04_01.
Find related papers by JEL classification: C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis