Endogenous Formation of Joint Ventures with Efficiency Gains

40 Pages Posted: 14 Sep 1998

See all articles by Sang-Seung Yi

Sang-Seung Yi

Seoul National University - School of Economics

Abstract

This paper studies stable structures of efficiency-enhancing joint ventures among symmetric firms. Efficiency gains that accrue to a joint venture are assumed to increase with its size. The socially efficient industry-wide joint venture is the stable outcome when membership of a joint venture is open to outside firms, but typically not when membership can be restricted. Members of a large joint venture want to restrict membership for strategic reasons -- e.g., in order to keep rival firms' costs high. Side payments among firms do not eliminate the strategic incentives of members of a large joint venture to limit membership.

Suggested Citation

Yi, Sang-Seung, Endogenous Formation of Joint Ventures with Efficiency Gains. Available at SSRN: https://ssrn.com/abstract=124629 or http://dx.doi.org/10.2139/ssrn.124629

Sang-Seung Yi (Contact Author)

Seoul National University - School of Economics ( email )

San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742
Korea

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