Equal Sharing Rules in Partnerships
Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that ``peer pressure'' mitigates the arising free-rider problem. This line of reasoning takes the equal sharing rule as exogenously given. The purpose of our paper is to show that with inequity averse partners - a behavioral assumption akin to peer pressure - the equal sharing rule arises endogenously as an optimal solution to the incentive problem in a partnership.
|Date of creation:||Sep 2007|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
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.:
- Steven Tadelis & Jonathan Levin, 2004. "Profit Sharing and the Role of Professional Partnerships," 2004 Meeting Papers 156, Society for Economic Dynamics.
- Dominique Demougin & Claude Fluet, 2003.
"Group vs. Individual Performance Pay When Workers Are Envious,"
CIRANO Working Papers
- Dominique Demougin & Claude Fluet, 2003. "Group vs. Individual Performance Pay When Workers Are Envious," Cahiers de recherche 0318, CIRPEE.
- Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September.
- Dominique Demougin & Claude Fluet & Carsten Helm, 2006.
"Output and wages with inequality averse agents,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 39(2), pages 399-413, May.
- Kandel, Eugene & Lazear, Edward P, 1992.
"Peer Pressure and Partnerships,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 801-817, August.
- Pedro Rey Biel, 2004.
"Inequity aversion and team incentives,"
- Pedro Rey-Biel, "undated". "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
- Pedro Rey-Biel, 2007. "Inequity Version and Team Incentives," UFAE and IAE Working Papers 677.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 120-137, May.
- Joseph Farrell and Suzanne Scotchmer., 1986.
Economics Working Papers
8616, University of California at Berkeley.
- Englmaier, Florian & Achim Wambach, 2003.
"Contracts and Inequity Aversion,"
Royal Economic Society Annual Conference 2003
74, Royal Economic Society.
- Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2005.
"The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems,"
IZA Discussion Papers
1851, Institute for the Study of Labor (IZA).
- Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2007. "The sociology of groups and the economics of incentives: Theory and evidence on compensation systems," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 187-214, February.
- William E. Encinosa, III & Martin Gaynor & James B. Rebitzer, . "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," GSIA Working Papers 49, Carnegie Mellon University, Tepper School of Business.
- William E. Encinosa III & Martin Gaynor & James B. Rebitzer, 1997. "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," NBER Working Papers 5953, National Bureau of Economic Research, Inc.
- Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
- George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
- William S. Neilson & Jill Stowe, 2010. "Piece-Rate Contracts For Other-Regarding Workers," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 575-586, 07.
- Miller, Nolan H., 1997. "Efficiency in Partnerships with Joint Monitoring," Journal of Economic Theory, Elsevier, vol. 77(2), pages 285-299, December.
When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:2027. 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: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.