Partnership dissolution, complementarity, and investment incentives
Partnerships form in order to take advantage of complementary skills; however, new opportunities may arise that make some partners' skills useless. We analyse partnerships that anticipate possible dissolution under the most commonly advised and widely used dissolution rule known as 'buy--sell provision'. We find that this rule assures neither ex post efficient dissolutions nor ex ante efficient investments. We also discuss whether renegotiations, supplementing the buy--sell provision with the right to veto, or allowing the uninformed partner to set the dissolution price may restore efficiency, and whether pre-emptive requests for dissolution occur in equilibrium. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.
Volume (Year): 62 (2010)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
References listed on IDEAS
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.:
- Peter Cramton & Robert Gibbons & Paul Klemperer, 1985.
"Dissolving a Partnership Efficiently,"
406, Massachusetts Institute of Technology (MIT), Department of Economics.
- Maria Angeles de Frutos & Thomas Kittsteiner, 2004.
"Efficient partnership dissolution under buy/sell clauses,"
Bonn Econ Discussion Papers
bgse1_2004, University of Bonn, Germany, revised Jul 2004.
- 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.
- Frutos, María Ángeles de & Kittsteiner, Thomas, 2006. "Efficient partnership dissolution under buy-sell clauses," UC3M Working papers. Economics we072816, Universidad Carlos III de Madrid. Departamento de Economía.
- Kittsteiner, T. & De Frutos & M-A, 2004. "Efficient Partnership Dissolution under Buy/Sell Clauses," Econometric Society 2004 Latin American Meetings 314, Econometric Society.
- Kittsteiner, Thomas, 2003.
"Partnerships and double auctions with interdependent valuations,"
Games and Economic Behavior,
Elsevier, vol. 44(1), pages 54-76, July.
- Kittsteiner, Thomas, 2000. "Partnerships and Double Auctions with Interdependent Valuations," Sonderforschungsbereich 504 Publications 01-15, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Banks, Jeffrey S. & Sobel, Joel., 1985.
"Equilibrium Selection in Signaling Games,"
565, California Institute of Technology, Division of the Humanities and Social Sciences.
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:62:y:2010:i:3:p:529-552. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.