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Optimal Structure and Dissolution of Partnerships

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  • Wasser, Cédric
  • Loertscher, Simon

Abstract

We derive the optimal incentive compatible and individually rational mechanisms to reallocate arbitrary given ownership shares among a set of agents. These mechanisms are optimal in the sense that they maximize social surplus of the final allocation subject to the aforementioned constraints and a revenue constraint. We allow for the agents' types to be drawn from non-identical distributions and for interdependent values. Because outside options are type dependent, the critical types for which individual rationality binds must be determined simultaneously with the allocation rule. We show that optimality uniquely pins down the set of critical types, which allows us to fully characterize the optimal mechanisms. Moreover, we find that the value function is Schur-concave in ownership shares when types are identically distributed, so that more symmetric shares are better irrespective of size of the revenue constraint.

Suggested Citation

  • Wasser, Cédric & Loertscher, Simon, 2015. "Optimal Structure and Dissolution of Partnerships," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113112, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc15:113112
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    File URL: https://www.econstor.eu/bitstream/10419/113112/1/VfS_2015_pid_694.pdf
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    References listed on IDEAS

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    1. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
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    Cited by:

    1. Van Essen, Matt & Wooders, John, 2016. "Dissolving a partnership dynamically," Journal of Economic Theory, Elsevier, vol. 166(C), pages 212-241.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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