IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Endogenous Formation Of Partnerships With Moral Hazard

  • Mar? Paz Espinosa
  • Inés Macho-Stadler

We analyze the formation of partnerships as a sequential choice-of-sizes game with moral hazard within coalitions; once formed, partnerships compete a la Cournot in the marketplace. We show that when moral hazard within coalitions is very severe, no partnership will form. However, when moral hazard is not too severe the coalition structure will be either similar or more concentrated than without moral hazard. We also show that, while without moral hazard too many coalitions are formed in equilibrium as compared to the efficient outcome, moral hazard may be responsible for an inefficiency of opposite sign.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 448.00.

in new window

Date of creation:
Date of revision:
Handle: RePEc:aub:autbar:448.00
Contact details of provider: Postal: 08193, Bellaterra, Barcelona
Phone: 34 93 592 1203
Fax: +34 93 542-1223
Web page:

More information through EDIRC

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.:

as in new window
  1. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
  2. Hart, Sergiu, 1974. "Formation of cartels in large markets," Journal of Economic Theory, Elsevier, vol. 7(4), pages 453-466, April.
  3. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  4. Morton I. Kamien & Israel Zang, 1990. "The Limits of Monopolization Through Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 465-499.
  5. Martin Gaynor & Paul Gertler, 1995. "Moral Hazard and Risk Spreading in Partnerships," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 591-613, Winter.
  6. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January.
  7. Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243273, July.
  8. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
  9. Espinosa Alejos, María Paz & Macho Stadler, Inés, 2002. "Endogenous Formation of Competing Partnership with Moral Hazard," DFAEII Working Papers 2002-34, University of the Basque Country - Department of Foundations of Economic Analysis II.
  10. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  11. Yi, Sang-Seung & Shin, Hyukseung, 2000. "Endogenous formation of research coalitions with spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 229-256, February.
  12. Belleflamme, Paul, 2000. "Stable Coalition Structures with Open Membership and Asymmetric Firms," Games and Economic Behavior, Elsevier, vol. 30(1), pages 1-21, January.
  13. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
  14. Kevin Lang & Peter-John Gordon, 1995. "Partnerships as Insurance Devices: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 614-629, Winter.
  15. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
  16. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
  17. Joseph Farrell & Suzanne Scotchmer, 1988. "Partnerships," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 279-297.
  18. Leibowitz, Arleen & Tollison, Robert, 1980. "Free Riding, Shirking, and Team Production in Legal Partnerships," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 380-94, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:aub:autbar:448.00. 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: (Xavier Vila)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.