Optimal Sharing Rules in Repeated Partnerships

KIER Discussion Paper No. 650

24 Pages Posted: 5 Oct 2008

See all articles by Hajime Kobayashi

Hajime Kobayashi

Kansai University - Faculty of Economics

Katsunori Ohta

Wakayama University

Tadashi Sekiguchi

Kobe University; Kyoto University - Institute of Economic Research

Date Written: March 15, 2008

Abstract

We study a simple model of repeated partnerships with noisy outcomes. Two partners first choose a sharing rule, under which they start their repeated interaction. We characterize the sharing rule which supports the most efficient equilibrium, and show that it suffices to consider two particular sharing rules. One is an asymmetric sharing rule, which induces only a more productive partner to work. It is optimal for impatient or less productive partners. The other treats them more evenly, and prevails for more productive partnerships with patient partners. Those results indicate that the role of a more productive partner crucially depends on technological parameters and patience. If the partners become more productive or more patient, the productive partner ceases to be a residual claimant and sacrifices his own share, in order to foster teamwork.

Keywords: Sharing Rules, Partnerships, Repeated Games, Imperfect Monitoring, AMP Formula

JEL Classification: C72, C73, L23, P13

Suggested Citation

Kobayashi, Hajime and Ohta, Katsunori and Sekiguchi, Tadashi and Sekiguchi, Tadashi, Optimal Sharing Rules in Repeated Partnerships (March 15, 2008). KIER Discussion Paper No. 650, Available at SSRN: https://ssrn.com/abstract=1278344 or http://dx.doi.org/10.2139/ssrn.1278344

Hajime Kobayashi (Contact Author)

Kansai University - Faculty of Economics ( email )

3-3-35 Yamatecho
Suita, Osaka, 564-8680
Japan

Katsunori Ohta

Wakayama University ( email )

930 Sakaedani
Wakayama
Japan

Tadashi Sekiguchi

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
Japan

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

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