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Efficient Dissolution of Partnerships and the Structure of Control

23 Pages Posted: 14 Sep 2004  

Emanuel Ornelas

Sao Paulo School of Economics

John L. Turner

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: June 2005

Abstract

Past work has shown that asymmetric information and asymmetric ownership affect the possibility of efficient dissolution of partnerships. We show that \textit{control} is also a central determinant of the possibility of efficient implementation. We demonstrate this point by analyzing a benchmark case of asymmetric control, where a single partner exercises complete control under the status quo partnership. We show that two-person partnerships cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structure, but that this impossibility result can be reversed if the number of partners is sufficiently large. Among other results, we show also that equal-shares partnerships are not generally the easiest to dissolve.

Keywords: Mechanism design, efficient trading, asymmetric control, partnerships

JEL Classification: C72, D82, L14

Suggested Citation

Ornelas, Emanuel and Turner, John L., Efficient Dissolution of Partnerships and the Structure of Control (June 2005). Available at SSRN: https://ssrn.com/abstract=589421 or http://dx.doi.org/10.2139/ssrn.589421

Emanuel Ornelas (Contact Author)

Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/emanuelornelaseo/

John L. Turner

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States

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