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Termination and Coordination in Partnerships


  • Deborah Minehart
  • Zvika Neeman


It is common practice for firms to pool their expertise by forming partnerships such as joint ventures and strategic alliances. A central organization problem in such partnerships is that managers may behave noncooperatively in order to advance the interests of their parent firms. We ask whether contracts can be designed so that managers will maximize total profits. We characterize first best contracts for a variety of environments and show that efficiency imposes some restrictions on the ownership shares. In addition, we evaluate the performance of two termination contracts that are widely used in practice: the shotgun rule and price competition. We find that although these contracts do not achieve full efficiency, they both perform well. We provide insight into when each rule is more efficient. Copyright (c) 1999 Massachusetts Institute of Technology.

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  • Deborah Minehart & Zvika Neeman, 1999. "Termination and Coordination in Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 191-221, June.
  • Handle: RePEc:bla:jemstr:v:8:y:1999:i:2:p:191-221

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    References listed on IDEAS

    1. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    2. Rose-Ackerman, Susan, 1987. "Ideals versus Dollars: Donors, Charity Managers, and Government Grants," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 810-823, August.
    3. Sugden, Robert, 1982. "On the Economics of Philanthropy," Economic Journal, Royal Economic Society, vol. 92(366), pages 341-350, June.
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    Cited by:

    1. Ludwig Ensthaler & Thomas Giebe & Jianpei Li, 2014. "Speculative partnership dissolution with auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 127-150, June.
    2. Chong-En Bai & Zhigang Tao & Changqi Wu, 2004. "Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 277-305, Summer.
    3. Jianpei Li & Yi Xue & Weixing Wu, 2013. "Partnership dissolution and proprietary information," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(2), pages 495-527, February.
    4. Christophe Bravard & Sudipta Sarangi & ANA MAULEON & JOSE J. SEMPERE-MONERRIS & VINCENT VANNETELBOSCH, 2016. "Contractually Stable Alliances," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 212-225, April.
    5. Richard R. W. Brooks & Claudia M. Landeo & Kathryn E. Spier, 2010. "Trigger happy or gun shy? Dissolving common-value partnerships with Texas shootouts," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 649-673.
    6. Wei Song & Zhiya Chen & Xuping Wang & Qian Wang & Chenghua Shi & Wei Zhao, 2017. "Environmentally Friendly Supplier Selection Using Prospect Theory," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-17, March.

    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure


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