Optimal Sharing Rules in Repeated Partnerships

Hajime Kobayashi, Katsunori Ohta () and Tadashi Sekiguchi ()
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Katsunori Ohta: Faculty of Economics, Wakayama University
Tadashi Sekiguchi: Institute of Economic Research, Kyoto University

No 650, KIER Working Papers from Kyoto University, Institute of Economic Research

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 and patient partners. Those results indicate how technological parameters and patience determine the role of a more productive partner. 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.

JEL-codes: C72 C73 L23 P13 (search for similar items in EconPapers)
Date: 2008-03
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