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Equal Sharing Rules in Partnerships

Björn Bartling and Ferdinand von Siemens

Journal of Institutional and Theoretical Economics (JITE), 2010, vol. 166, issue 2, 299-320

Abstract: Partnerships are the prevalent organizational form in many industries. Profits are most frequently shared equally among the partners. The purpose of our paper is to provide a rationale for equal sharing rules. We show that with inequity-averse partners the equal sharing rule is the unique sharing rule that maximizes the partners' incentives to exert effort. We further show that inequity aversion can enhance efficiency in partnerships of given size, but that it can also cause partnerships to be inefficiently small.

JEL-codes: D20 D86 J54 (search for similar items in EconPapers)
Date: 2010
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Working Paper: Equal Sharing Rules in Partnerships (2007) Downloads
Working Paper: Equal Sharing Rules in Partnerships (2007) Downloads
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