Björn Bartling (Institute for Empirical Research in Economics, bartling@lmu.de) Ferdinand von Siemens (Department of Economics,ferdinand.vonsiemens@lrz.uni-muenchen.de)
Abstract
Partnerships are the prevalent organizational form in many industries. Most partnerships share pro¯ts equally among the partners. Following Kandel and Lazear (1992) it is often argued that \peer pressure" mitigates the arising free-rider problem. This line of reasoning takes the equal sharing rule as exogenously given. The purpose of our paper is to show that with inequity averse partners { a behavioral assumption akin to peer pressure { the equal sharing rule arises endogenously as an optimal solution to the incentive problem in a partnership.
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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
217.
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