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Non-cooperative investment in partnerships and their termination

  • Franz Wirl

    ()

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

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File URL: http://hdl.handle.net/10.1007/s10100-009-0107-1
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Article provided by Springer & Slovak Society for Operations Research & Hungarian Operational Research Society & Czech Society for Operations Research & Österr. Gesellschaft für Operations Research (ÖGOR) & Slovenian Society Informatika - Section for Operational Research & Croatian Operational Research Society in its journal Central European Journal of Operations Research.

Volume (Year): 17 (2009)
Issue (Month): 4 (December)
Pages: 479-494

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Handle: RePEc:spr:cejnor:v:17:y:2009:i:4:p:479-494
DOI: 10.1007/s10100-009-0107-1
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  1. Colin Rowat, 2005. "Non-linear strategies in a linear quadratic differential game," GE, Growth, Math methods 0502001, EconWPA.
  2. Fershtman, Chaim & Nitzan, Shmuel, 1991. "Dynamic voluntary provision of public goods," European Economic Review, Elsevier, vol. 35(5), pages 1057-1067, July.
  3. Steven Huddart & Pierre Jinghong Liang, 2003. "Accounting in Partnerships," American Economic Review, American Economic Association, vol. 93(2), pages 410-414, May.
  4. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
  5. Dumas, Bernard, 1991. "Super contact and related optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 675-685, October.
  6. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, Junio.
  7. Keilbach, Max & Bönte, Werner, 2004. "Concubinage or Marriage? Informal and Formal Cooperations for Innovation," ZEW Discussion Papers 04-11, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Feichtinger, Gustav & Wirl, Franz, 1993. "A Dynamic Variant of the Battle of the Sexes," International Journal of Game Theory, Springer;Game Theory Society, vol. 22(4), pages 359-80.
  9. Wirl, Franz & Feichtinger, Gustav, 2002. "Intrafamiliar Consumption and Saving under Altruism and Wealth Considerations," Economica, London School of Economics and Political Science, vol. 69(273), pages 93-111, February.
  10. Paola Manzini & Marco Mariotti, 2004. "Going Alone Together: Joint Outside Options in Bilateral Negotiations," Economic Journal, Royal Economic Society, vol. 114(498), pages 943-960, October.
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