VALUE OF THE STATUS QUO AND EFFICIENT PARTNERSHIP DISSOLUTION

Murali Agastya and Oleksii Birulin

International Economic Review, 2018, vol. 59, issue 4, 2023-2042

Abstract: Allowing the value of an asset to depend on the ownership structure, we study ex post efficient (EPEF) dissolution of a partnership in a multidimensional independent private value (IPV) environment. The status‐quo may now be an EPEF outcome. Under mild support restrictions, we show that no partnership can be dissolved. Moreover, when the restrictions fail, one can dissolve a highly skewed partnership but not the equal partnership. These results are in stark contrast to the literature that follows Cramton et al. (Econometrica 55 (1987), 615–32) where an even allocation of initial property rights ensures efficient dissolution.

Date: 2018
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