IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v62y2010i3p529-552.html
   My bibliography  Save this article

Partnership dissolution, complementarity, and investment incentives

Author

Listed:
  • Jianpei Li
  • Elmar Wolfstetter

Abstract

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.

Suggested Citation

  • Jianpei Li & Elmar Wolfstetter, 2010. "Partnership dissolution, complementarity, and investment incentives," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 529-552, July.
    • Handle: RePEc:oup:oxecpp:v:62:y:2010:i:3:p:529-552
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpp030
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Kittsteiner, Thomas, 2003. "Partnerships and double auctions with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 44(1), pages 54-76, July.
    3. Cramton, Peter & Gibbons, Robert & Klemperer, Paul, 1987. "Dissolving a Partnership Efficiently," Econometrica, Econometric Society, vol. 55(3), pages 615-632, May.
    4. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-661, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Özgür Kıbrıs & Arzu Kıbrıs, 2016. "On surplus-sharing in partnerships," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(1), pages 89-111, June.
    2. Nicola Dimitri, 2021. "The “Italian Football Federation Auction” for Co-ownership Resolution," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(2), pages 275-285, March.
    3. Comino, Stefano & Nicolò, Antonio & Tedeschi, Piero, 2010. "Termination clauses in partnerships," European Economic Review, Elsevier, vol. 54(5), pages 718-732, July.
    4. Alistair Wilson & Hong Wu, 2014. "Dissolution of Partnerships in Infinitely Repeated Games," Working Paper 532, Department of Economics, University of Pittsburgh, revised Aug 2014.
    5. 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.
    6. John Turner, 2013. "Dissolving (in)effective partnerships," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(2), pages 321-335, July.
    7. Comino, Stefano & Nicolò, Antonio & Tedeschi, Piero, 2010. "Termination clauses in partnerships," European Economic Review, Elsevier, vol. 54(5), pages 718-732, July.
    8. 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.
    9. Wilson, Alistair J. & Wu, Hong, 2017. "At-will relationships: How an option to walk away affects cooperation and efficiency," Games and Economic Behavior, Elsevier, vol. 102(C), pages 487-507.
    10. Bernhard Ganglmair, 2008. "Breakup of Repeat Transaction Contracts, Specific Investment, and Efficient Rent-Seeking," JEPS Working Papers 08-001, JEPS.
    11. Li, Jianpei, 2009. "Partnership Dissolution and Proprietary Information," MPRA Paper 12505, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Loertscher, Simon & Wasser, Cédric, 2019. "Optimal structure and dissolution of partnerships," Theoretical Economics, Econometric Society, vol. 14(3), July.
    2. Li, Jianpei, 2009. "Partnership Dissolution and Proprietary Information," MPRA Paper 12505, University Library of Munich, Germany.
    3. Wasser, Cédric, 2013. "Bilateral k+1-price auctions with asymmetric shares and values," Games and Economic Behavior, Elsevier, vol. 82(C), pages 350-368.
    4. Athanassoglou, Stergios & Brams, Steven J. & Sethuraman, Jay, 2010. "A note on the inefficiency of bidding over the price of a share," Mathematical Social Sciences, Elsevier, vol. 60(3), pages 191-195, November.
    5. 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.
    6. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
    7. Hyndman, Kyle, 2021. "Dissolving partnerships under risk: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 702-720.
    8. Van Essen, Matt & Wooders, John, 2016. "Dissolving a partnership dynamically," Journal of Economic Theory, Elsevier, vol. 166(C), pages 212-241.
    9. Nicolò, Antonio & Velez, Rodrigo A., 2017. "Divide and compromise," Mathematical Social Sciences, Elsevier, vol. 90(C), pages 100-110.
    10. Alejandro Francetich, 2023. "When partner knows best: asymmetric expertise in partnerships," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 363-399, June.
    11. Stefano Galavotti & Nozomu Muto & Daisuke Oyama, 2011. "On efficient partnership dissolution under ex post individual rationality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(1), pages 87-123, September.
    12. John Turner, 2013. "Dissolving (in)effective partnerships," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(2), pages 321-335, July.
    13. Seiglie Carlos & Xiang Jun, 2017. "Determining Values Using Options Contracts," Asian Journal of Law and Economics, De Gruyter, vol. 8(1), pages 1-17, April.
    14. 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, December.
    15. Brown, Alexander L. & Velez, Rodrigo A., 2016. "The costs and benefits of symmetry in common-ownership allocation problems," Games and Economic Behavior, Elsevier, vol. 96(C), pages 115-131.
    16. Kittsteiner, Thomas & Ockenfels, Axel & Trhal, Nadja, 2012. "Partnership dissolution mechanisms in the laboratory," Economics Letters, Elsevier, vol. 117(2), pages 394-396.
    17. Comino, Stefano & Nicolò, Antonio & Tedeschi, Piero, 2010. "Termination clauses in partnerships," European Economic Review, Elsevier, vol. 54(5), pages 718-732, July.
    18. Yuri Khoroshilov, 2018. "Partnership Dissolution: Information and Efficiency+," Decision Analysis, INFORMS, vol. 15(3), pages 133-138, September.
    19. 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.
    20. Veronica Guerrieri & Robert Shimer, 2018. "Markets with Multidimensional Private Information," American Economic Journal: Microeconomics, American Economic Association, vol. 10(2), pages 250-274, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.