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Partnerships

Ludovic Renou

No 2006-05, School of Economics Working Papers from University of Adelaide, School of Economics

Abstract: This paper analyzes the endogenous formation of a partnership as the trade-off between efficiency gains and a 'cost' associated with the partial loss of control over the decisions the partnership takes. For instance, by forming a monetary union, countries benefit from a more coordinated monetary policy. However, due to the partial loss of control over the union decision, the policy implemented might differ from the policy a member would have taken on their own. We interpret this possible difference as a cost. We notably show that individuals with ''similar" characteristics form a partnership, and the more diverse the characteristics, the smaller the partnership size.

Keywords: partnerships; coalitions; alliances; endogenous formation; efficiency gains; loss of control; diverse characteristics; opinions (search for similar items in EconPapers)
JEL-codes: D7 (search for similar items in EconPapers)
Date: 2006
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