Mechanisms for dividing labor and sharing revenue in joint ventures
Keith Waehrer ()
Review of Economic Design, 2004, vol. 8, issue 4, 465-477
Organizing the productive efforts of firms participating in a joint venture involves assigning firms to tasks according to abilities. A multidimensional incentive problem arises when abilities are private information. In any equilibrium, it is better to be a firm who is a specialist rather than a generalist. However, generalists can expect to receive a larger allocation of revenue. If at least one firm is decisive to the profitability of the joint venture (i.e., if it can make a credible cost announcement that implies the joint venture earns zero profit), then the joint venture will not be able to implement a profit maximizing or cost minimizing production plan. Copyright Springer-Verlag Berlin/Heidelberg 2004
Keywords: Mechanism design; joint venture; team production (search for similar items in EconPapers)
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