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Partnership Dissolution and Proprietary Information

  • Li, Jianpei
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    This paper studies different rules in dissolving a common value partnership where one partner holds proprietary information. In winner's bid auction (WBA) and loser's bid auction (LBA), there exists a unique mixed strategy equilibrium. ``Payoff equivalence'' is established in the sense that partners' expected payoffs are the same under the two auction formats. The informed partner benefits from an information rent while the uninformed suffers from an ``ownership's curse''. When cake-cutting mechanism (CCM) is applied, whether pure strategy equilibrium exists or not depends on the identity of the proposer. If the uninformed partner is the proposer, the informed partner receives an information rent in a pure strategy equilibrium. If the informed partner is the proposer, the asset value is shared equally between the two parties in a mixed strategy equilibrium. The paper then compares the information rents and prices offered for proprietary information by the three rules.

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    File URL: http://mpra.ub.uni-muenchen.de/12505/1/MPRA_paper_12505.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12505.

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    Date of creation: Jan 2009
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    Handle: RePEc:pra:mprapa:12505
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    1. Kittsteiner, Thomas, 2003. "Partnerships and double auctions with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 44(1), pages 54-76, July.
    2. Juan Dubra, 2004. "A Correction to Uniqueness in 'Competitive Bidding and Proprietary Information'," Game Theory and Information 0409005, EconWPA.
    3. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 66-, March.
    4. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
    5. Ornelas, Emanuel & Turner, John L., 2007. "Efficient dissolution of partnerships and the structure of control," Games and Economic Behavior, Elsevier, vol. 60(1), pages 187-199, July.
    6. María-Angeles de Frutos & Thomas Kittsteiner, 2008. "Efficient partnership dissolution under buy-sell clauses," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 184-198.
    7. Peter Cramton & Robert Gibbons & Paul Klemperer, 1987. "Dissolving a Partnership Efficiently," Papers of Peter Cramton 87econ, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
    8. de Frutos, M. Angeles, 2000. "Asymmetric Price-Benefits Auctions," Games and Economic Behavior, Elsevier, vol. 33(1), pages 48-71, October.
    9. Jianpei Li & Elmar Wolfstetter, 2010. "Partnership dissolution, complementarity, and investment incentives," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 529-552, July.
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