Equal Sharing Rules in Partnerships
AbstractPartnerships are the prevalent organizational form in many industries. Most partnerships share profits 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 217.
Date of creation: Aug 2007
Date of revision:
Contact details of provider:
Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany
Web page: http://www.sfbtr15.de/
More information through EDIRC
equal sharing rule; partnerships; incentives; peer pressure; inequity aversion;
Other versions of this item:
- Björn Bartling & Ferdinand A. von Siemens, 2010. "Equal Sharing Rules in Partnerships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 299-320, June.
- D20 - Microeconomics - - Production and Organizations - - - General
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph Farrell and Suzanne Scotchmer., 1986.
Economics Working Papers
8616, University of California at Berkeley.
- Florian Englmaier & Achim Wambach, 2002.
"Contracts and Inequity Aversion,"
CESifo Working Paper Series
809, CESifo Group Munich.
- Dominique Demougin & Claude Fluet & Carsten Helm, 2004.
"Output and Wages with Inequality Averse Agents,"
Cahiers de recherche
- Kandel, Eugene & Lazear, Edward P, 1992.
"Peer Pressure and Partnerships,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 801-17, August.
- William S. Neilson & Jill Stowe, 2010. "Piece-Rate Contracts For Other-Regarding Workers," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 575-586, 07.
- Pedro Rey Biel, 2004.
"Inequity aversion and team incentives,"
- Pedro Rey-Biel, 2007. "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
- Pedro Rey-Biel, 2007. "Inequity Version and Team Incentives," UFAE and IAE Working Papers 677.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- William E. Encinosa, III & Martin Gaynor & James B. Rebitzer, .
"The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems,"
GSIA Working Papers
49, Carnegie Mellon University, Tepper School of Business.
- Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2007. "The sociology of groups and the economics of incentives: Theory and evidence on compensation systems," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 187-214, February.
- William E. Encinosa III & Martin Gaynor & James B. Rebitzer, 1997. "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," NBER Working Papers 5953, National Bureau of Economic Research, Inc.
- Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2005. "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," IZA Discussion Papers 1851, Institute for the Study of Labor (IZA).
- Steven Tadelis & Jonathan Levin, 2004.
"Profit Sharing and the Role of Professional Partnerships,"
2004 Meeting Papers
156, Society for Economic Dynamics.
- Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 131-171, January.
- Dominique Demougin & Claude Fluet, 2003.
"Group vs. Individual Performance Pay When Workers Are Envious,"
Cahiers de recherche
- Dominique Demougin & Claude Fluet, 2003. "Group vs. Individual Performance Pay When Workers Are Envious," CIRANO Working Papers 2003s-10, CIRANO.
- Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 120-137, May.
- Miller, Nolan H., 1997. "Efficiency in Partnerships with Joint Monitoring," Journal of Economic Theory, Elsevier, vol. 77(2), pages 285-299, December.
- Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
- Dominik Erharter, 2013. "Screening Experts' Distributional Preferences," Working Papers 2013-27, Faculty of Economics and Statistics, University of Innsbruck.
- Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.
- Rasch, Alexander & Wambach, Achim & Wiener, Kristina, 2012. "Bargaining and inequity aversion: On the efficiency of the double auction," Economics Letters, Elsevier, vol. 114(2), pages 178-181.
- Jianpei Li, 2009. "Team production with inequity-averse agents," Portuguese Economic Journal, Springer, vol. 8(2), pages 119-136, August.
- Bartling, Björn & von Siemens, Ferdinand A., 2011. "Wage inequality and team production: An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 1-16, February.
- L. Bagnoli & G. Negroni, 2013. "Egalitarianism. An evolutionary perspective," Working Papers wp888, Dipartimento Scienze Economiche, Universita' di Bologna.
- De Marco, Giuseppe & Immordino, Giovanni, 2013.
"Partnership, reciprocity and team design,"
Research in Economics,
Elsevier, vol. 67(1), pages 39-58.
- David, Gill & Rebecca, Stone, 2012.
"Desert and inequity aversion in teams,"
36864, University Library of Munich, Germany.
- Jan Y. Sand, 2009. "Efficiency in complementary partnerships with competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 57-70.
- Bartling, Björn, 2011. "Relative performance or team evaluation? Optimal contracts for other-regarding agents," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 183-193, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.