Reorganizing a partnership efficiently

Eric S. Chou (), Meng-Yu Liang () and Cheng-Tai Wu ()
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Eric S. Chou: National Tsing Hua University
Meng-Yu Liang: Institute of Economics, Academia Sinica
Cheng-Tai Wu: Fu Jen Catholic University

Review of Economic Design, 2022, vol. 26, issue 2, No 5, 233-246

Abstract: Abstract We modify the partnership dissolution model pioneered by Cramton et al. (Econometrica 55:615–632, 1987) to consider the possibility that each partner has an optimal scale and hence values only a fraction of an object, called a block. To achieve efficiency, a partnership should be reorganized so that multiple blocks are allocated one-to-one to the partners who have the highest valuations. The set of initial ownership distributions under which efficient reorganization can be achieved is non-convex. A condition reveals the relationship between the possibility of efficient reorganization for any given partnership and three characteristics that it entails: the number of blocks available (K), the total number of partners (N), and the number of partners who own up to a block (S). Given that K and N are fixed, efficiency can be achieved if and only if S is sufficiently low. In addition, given that N and S are fixed, efficiency can be achieved if and only if K is sufficiently high.

Keywords: Partnership dissolution; Mechanism design; Auction (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10058-021-00266-3

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