Efficient and nearly efficient partnerships
This paper shows in two ways that the degree to which free-riding diminishes the performance of deterministic partnerships may be less than has been generally thought. First, a necessary and sufficient condition is provided for a partnership to sustain full efficiency. It implies that many non-trivial partnerships sustain efficiency, such as generic ones with finite action spaces, and neoclassical ones with Leontief technologies. Second, approximate efficiency is shown to be achievable in a large class of partnerships, including ones with smooth and monotonic production and disutility functions. Approximate efficiency is achieved by mixed-strategy equilibria: one partner takes, with small probability, an inefficient action. The degree to which efficiency is approximated is restricted only by the amount of liability the partners can bear. Nonetheless, their equilibrium payments are not arbitrarily large.
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|Date of creation:||1993|
|Publication status:||Published in: The Review of Economic Studies (1993) v.60 n° 3,p.599-611|
|Contact details of provider:|| Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles|
Web page: http://difusion.ulb.ac.be
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- Legros, Patrick & Matsushima, Hitoshi, 1991.
"Efficiency in partnerships,"
Journal of Economic Theory,
Elsevier, vol. 55(2), pages 296-322, December.
- Patrick Legros & Hitoshi Matsushima, 1991. "Efficiency in partnerships," ULB Institutional Repository 2013/7044, ULB -- Universite Libre de Bruxelles.
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- Patrick Legros & Andrew Newman, 1996. "Wealth effects, distribution, and the theory of organization," ULB Institutional Repository 2013/7036, ULB -- Universite Libre de Bruxelles.
- Steven R. Williams & Roy Radner, 1988. "Efficiency in Partnership When The Joint Output is Uncertain," Discussion Papers 760, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Roy Radner, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 43-57.
- Roy Radner & Roger Myerson & Eric Maskin, 1986. "An Example of a Repeated Partnership Game with Discounting and with Uniformly Inefficient Equilibria," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 59-69.
- Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
- Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
- Bengt Holmstrom, 1997. "Moral Hazard and Observability," Levine's Working Paper Archive 1205, David K. Levine.
- Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn. Full references (including those not matched with items on IDEAS)
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