Paying the Partners

36 Pages Posted: 20 Sep 2007

See all articles by T. Nicolaus Tideman

T. Nicolaus Tideman

Virginia Polytechnic Institute & State University - Department of Economics

Florenz Plassmann

SUNY at Binghamton, Department of Economics

Date Written: April 5, 2007

Abstract

When three or more individuals with disparate talents form a business partnership, they may find it difficult to agree on how their profits will be divided. This paper explores a rule for dividing the profits that depends only on the partners' estimates of the relative contributions of other partners. No partner can affect his own share by the input that he provides. If there is a division that is consistent with the relative contributions suggested by all partners, then the division rule assigns these shares. We provide the intuition for the division rule and investigate several of its properties.

Keywords: Fair division, aggregating opinions, Dirichlet distribution

JEL Classification: D33, D72

Suggested Citation

Tideman, T. Nicolaus and Plassmann, Florenz, Paying the Partners (April 5, 2007). Available at SSRN: https://ssrn.com/abstract=1015823 or http://dx.doi.org/10.2139/ssrn.1015823

T. Nicolaus Tideman

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

Florenz Plassmann (Contact Author)

SUNY at Binghamton, Department of Economics ( email )

Binghamton, NY 13902-6000
United States
607-777-4304 (Phone)

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