Termination and Coordination in Partnerships

Deborah Minehart and Zvika Neeman ()

Journal of Economics & Management Strategy, 1999, vol. 8, issue 2, 191-221

Abstract: It is common practice for firms to pool their expertise by forming partnerships such as joint ventures and strategic alliances. A central organization problem in such partnerships is that managers may behave noncooperatively in order to advance the interests of their parent firms. We ask whether contracts can be designed so that managers will maximize total profits. We characterize first best contracts for a variety of environments and show that efficiency imposes some restrictions on the ownership shares. In addition, we evaluate the performance of two termination contracts that are widely used in practice: the shotgun rule and price competition. We find that although these contracts do not achieve full efficiency, they both perform well. We provide insight into when each rule is more efficient.

Date: 1999
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https://doi.org/10.1111/j.1430-9134.1999.00191.x

Related works:
Working Paper: Termination and Coordination in Partnerships (1997)
Working Paper: Termination and Coordination in Partnerships (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:8:y:1999:i:2:p:191-221

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