Optimal Structure and Dissolution of Partnerships

59 Pages Posted: 20 Jul 2015 Last revised: 19 Dec 2018

See all articles by Simon Loertscher

Simon Loertscher

University of Melbourne - Department of Economics

Cédric Wasser

University of Basel - Faculty of Business and Economics

Date Written: December 19, 2018

Abstract

For a partnership model with general type distributions and interdependent values, we derive the optimal dissolution mechanisms that, for arbitrary initial ownership, maximize any convex combination of revenue and social surplus. The solution involves ironing around typically interior worst-off types, which are endogenously determined. The optimal ownership structures are such that, with identical distributions, equal shares are always optimal. With non-identical distributions, the optimal shares are typically asymmetric; the identity of the agents with large shares may change with the importance of revenue generation; and even fully concentrated initial ownership, and assigning zero shares to the strongest agents, can be optimal.

Keywords: partnership dissolution, mechanism design, property rights, interdependent values, asymmetric type distributions

JEL Classification: D23, D61, D82

Suggested Citation

Loertscher, Simon and Wasser, Cédric, Optimal Structure and Dissolution of Partnerships (December 19, 2018). Available at SSRN: https://ssrn.com/abstract=2633107 or http://dx.doi.org/10.2139/ssrn.2633107

Simon Loertscher

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Cédric Wasser (Contact Author)

University of Basel - Faculty of Business and Economics ( email )

Peter-Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://www.cedricwasser.net

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