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Partnerships

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  • Farrell, Joseph
  • Scotchmer, Suzanne

Abstract

A partnership is a coalition that divides its output equally. We show that when partnerships can form freely, a stable or "core" partition into partnerships always exists and is generically unique. When people differ in ability, the equal-sharing constraint inefficiently limits the size of partnerships. We give conditions under which partnerships containing abler people will be larger, and show that if the population is replicated, partnerships may become more or less homogeneous, depending on an elasticity condition. We also examine when the equal-sharing inefficiency vanishes in the limit.
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Suggested Citation

  • Farrell, Joseph & Scotchmer, Suzanne, 1986. "Partnerships," Department of Economics, Working Paper Series qt49d211x4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:econwp:qt49d211x4
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    References listed on IDEAS

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    1. William H. Branson & Julio J. Rotemberg, 1991. "International Adjustment with Wage Rigidity," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 13-44 National Bureau of Economic Research, Inc.
    2. Girton, Lance & Henderson, Dale W., 1976. "Financial capital movements and central bank behavior in a two-country, short-run portfolio balance model," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 33-61, January.
    3. Jeffrey Sachs, 1980. "Wages, Flexible Exchange Rates, and Macroeconomic Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 731-747.
    4. Taylor, John B., 1985. "International coordination in the design of macroeconomic policy rules," European Economic Review, Elsevier, vol. 28(1-2), pages 53-81.
    5. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
    6. Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76.
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