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Efficient partnership dissolution under buy‐sell clauses

Author

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  • María‐Angeles de Frutos
  • Thomas Kittsteiner

Abstract

Buy‐sell clauses are commonly used contractual provisions to determine the terms of dissolution of partnerships. Under them, one party offers a price for the partnership and the other party chooses whether to sell her share or buy her partner's share at this price. We point out that the selection of the proposing partner is essential for the performance of the clause. Moreover, if partners negotiate for the advantage of being the chooser, then buy‐sell clauses result in an ex post efficient outcome. Such endogenous selection is consistent with how buy‐sell clauses are drafted in practice.

Suggested Citation

  • María‐Angeles de Frutos & Thomas Kittsteiner, 2008. "Efficient partnership dissolution under buy‐sell clauses," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 184-198, March.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:184-198
    DOI: 10.1111/j.1756-2171.2008.00009.x
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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