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Strategyproof Profit Sharing in Partnerships: Improving upon Autarky

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  • Leroux, Justin

    (Rice U)

Abstract

Several producers decide to form a partnership, to which they contribute both capital and labor. We propose a group-strategyproof mechanism under which no single agent is tempted to secede from the partnership: the inverse marginal product proportions (or IMPP) mechanism. The IMPP mechanism combines aspects of common ownership with the requirement that private property rights be respected: when an agent decides to stop exploiting her own capital, the latter is shared between the remaining agents in proportion to the productivity of their own capital. The IMPP is in fact the only fixed-path method (as introduced in Friedman, 2002) to satisfy autarkic individual rationality; its path is uniquely determined by the capital contributions of the agents. Thus, our results provide one of the first economic motivation for the asymmetry of fixed-path methods.

Suggested Citation

  • Leroux, Justin, 2005. "Strategyproof Profit Sharing in Partnerships: Improving upon Autarky," Working Papers 2005-05, Rice University, Department of Economics.
  • Handle: RePEc:ecl:riceco:2005-05
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    File URL: http://www.ruf.rice.edu/~econ/papers/2005papers/leroux05.pdf
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    References listed on IDEAS

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    Cited by:

    1. Leroux, Justin, 2008. "Profit sharing in unique Nash equilibrium: Characterization in the two-agent case," Games and Economic Behavior, Elsevier, vol. 62(2), pages 558-572, March.
    2. M. Albizuri, 2010. "The self-dual serial cost-sharing rule," Theory and Decision, Springer, vol. 69(4), pages 555-567, October.
    3. Albizuri, M. Josune & Zarzuelo, Jose M., 2007. "The dual serial cost-sharing rule," Mathematical Social Sciences, Elsevier, vol. 53(2), pages 150-163, March.
    4. Albizuri, M. Josune, 2010. "The [alpha]-serial cost-sharing rule," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 24-29, July.
    5. Leroux, Justin, 2005. "Strategyproof Profit Sharing: A Two-Agent Characterization," Working Papers 2005-04, Rice University, Department of Economics.

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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