Non-cooperative investment in partnerships and their termination
This paper investigates how partners (firms or husband and wife) should invest into an uncertain stock that provides a common good, when to stop investments and when to end their partnership. The assumption of lumpy investments leads to a real option problem which is solved for the cooperative and non-cooperative solutions. Yet despite the analytical solution, numerical means are necessary to investigate economic consequences: strong incentives to free ride under competition even turning one of the options—to stop investment at high stock levels—into one of a negative value; in contrast, divorce remains a positively valued option. Copyright Springer-Verlag 2009
Volume (Year): 17 (2009)
Issue (Month): 4 (December)
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