Dissolving a Partnership Securely
21 Pages Posted: 29 Mar 2017
Date Written: February 27, 2017
We characterize security strategies and payoffs for three mechanisms for dissolving partnerships: the Texas Shoot-Out, the K 1 auction, and the compensation auction. A security strategy maximizes a participant's minimum payoff, and represents a natural starting point for analysis when a participant is either uncertain of the environment or uncertain of whether his rivals will play equilibrium. For the compensation auction, a dynamic dissolution mechanism, we introduce the notion of a perfect security strategy. Such a strategy maximizes a participant's minimum payoff along every path of play. We show that the compensation auction has a unique such strategy.
Keywords: partnership, security strategy, maximin
JEL Classification: C72, C78, D44, D82
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