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Optimal Sharing Rules in Repeated Partnerships

Author

Listed:
  • Hajime Kobayashi

    () (College of Economics, Osaka Prefecture University)

  • Katsunori Ohta

    () (Faculty of Economics, Wakayama University)

  • Tadashi Sekiguchi

    () (Institute of Economic Research, Kyoto University)

Abstract

We study a simple model of repeated partnerships with noisy outcomes. Two partners first choose a sharing rule, under which they start their repeated interaction. We characterize the sharing rule which supports the most efficient equilibrium, and show that it suffices to consider two particular sharing rules. One is an asymmetric sharing rule, which induces only a more productive partner to work. It is optimal for impatient or less productive partners. The other treats them more evenly, and prevails for more productive and patient partners. Those results indicate how technological parameters and patience determine the role of a more productive partner. If the partners become more productive or more patient, the productive partner ceases to be a residual claimant and sacrifices his own share, in order to foster teamwork.

Suggested Citation

  • Hajime Kobayashi & Katsunori Ohta & Tadashi Sekiguchi, 2008. "Optimal Sharing Rules in Repeated Partnerships," KIER Working Papers 650, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:650
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP650.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bogumił Kamiński & Maciej Łatek, 2010. "Tradeoff between Equity and Effciency in Revenue Sharing Contracts," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(1), pages 1-16, January.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

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