Efficiency in complementary partnerships with competition
The objective of this paper is to show how efficiency can be implemented in a market with strictly complementary inputs when the productive firms undertake unobservable effort. The observable output is a joint undertaking by a partnership consisting of two types of firms. It is shown that simple linear sharing rules cannot implement socially optimal effort, but a modified linear sharing rule can implement the first-best outcome provided that commitment to the proposed sharing rule is possible. This is so even when the sharing rule is proposed by one of the active partners. When opening up for the possibility of renegotiating sharing contracts that have undesirable properties for one or more of the firms, it becomes more difficult to implement socially efficient solutions. Implementation of the socially efficient outcome requires that the sharing rule is proposed by an outsider to the partnership. Copyright © 2008 John Wiley & Sons, Ltd.
Volume (Year): 30 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
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.:
- McAfee, R Preston & McMillan, John, 1991. "Optimal Contracts for Teams," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 561-77, August.
- Joseph Farrell and Suzanne Scotchmer., 1986.
Economics Working Papers
8616, University of California at Berkeley.
- Hvide, Hans K, 2001. "Some Comments on Free-Riding in Leontief Partnerships," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 467-73, July.
- Eric Maskin & John Moore, 1998.
"Implementation and renegotiation,"
LSE Research Online Documents on Economics
19350, London School of Economics and Political Science, LSE Library.
- Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," Harvard Institute of Economic Research Working Papers 1863, Harvard - Institute of Economic Research.
- Jerry R. GREEN & Jean-Jacques LAFFONT, 1992.
"Renegotiation and the Form of Efficient Contracts,"
Annales d'Economie et de Statistique,
ENSAE, issue 25-26, pages 123-150.
- Kline, J. Jude, 1997. "Efficiency and equilibria in complementary teams: A comment," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 621-623, April.
- Bartling, BjÃ¶rn & Siemens, Ferdinand von, 2007.
"Equal Sharing Rules in Partnerships,"
Discussion Papers in Economics
2027, University of Munich, Department of Economics.
- Björn Bartling & Ferdinand A. von Siemens, 2010. "Equal Sharing Rules in Partnerships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 299-320, June.
- Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 217, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Oliver Hart & John Moore, 1985.
"Incomplete Contracts and Renegotiation,"
367, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, P. & Dewatripont, M. & Rey, P., 1990.
"On renegotiation design,"
European Economic Review,
Elsevier, vol. 34(2-3), pages 322-329, May.
- Tirole, Jean, 1986.
"Procurement and Renegotiation,"
Journal of Political Economy,
University of Chicago Press, vol. 94(2), pages 235-59, April.
- Vislie, Jon, 1994. "Efficiency and equilibria in complementary teams," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 83-91, January.
- Kandel, Eugene & Lazear, Edward P, 1992.
"Peer Pressure and Partnerships,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 801-17, August.
- Patrick Legros & Steven Matthews, 1993.
"Efficient and nearly efficient partnerships,"
ULB Institutional Repository
2013/7040, ULB -- Universite Libre de Bruxelles.
When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:30:y:2009:i:1:p:57-70. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.