Economics at your fingertips  

Speculative partnership dissolution with auctions

Ludwig Ensthaler (), Thomas Giebe () and Jianpei Li ()

Review of Economic Design, 2014, vol. 18, issue 2, 127-150

Abstract: The literature on partnership dissolution generally takes the dissolution decision as given and examines whether the outcome is efficient. A well-known result is that $$k+1$$ k + 1 -price auctions dissolve a partnership efficiently when the share structure is sufficiently close to equal. We extend the setup in two directions. First, we introduce complementarities by assuming a nontrivial continuation value of the partnership that is lost in case of dissolution. This makes inefficient breakups as well as continuation possible outcomes. Second, we assume that dissolution is not given, but must be triggered by a deliberate decision of at least one partner. This implies a signaling game, where calling for dissolution signals private information. We show that, in our extended setting, standard $$k+1$$ k + 1 -price auctions cannot dissolve a two-player equal-share partnership ex post efficiently. While allowing for veto or requiring consent does not help, adding a proper reserve to the winner’s bid auction restores efficiency. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Partnership dissolution; $$k+1$$ k + 1 -Price auctions; Efficiency; C78; D23; D44; J12; L24 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Review of Economic Design is currently edited by Atila Abdulkadiroglu, Fuhito Kojima and Tilman Börgers

More articles in Review of Economic Design from Springer, Society for Economic Design
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-07-22
Handle: RePEc:spr:reecde:v:18:y:2014:i:2:p:127-150