Strategyproof Profit Sharing in Partnerships: Improving upon Autarky

Justin Leroux

Working Papers from Rice University, Department of Economics

Abstract: Several producers decide to form a partnership, to which they contribute both capital and labor. We propose a group-strategyproof mechanism under which no single agent is tempted to secede from the partnership: the inverse marginal product proportions (or IMPP) mechanism. The IMPP mechanism combines aspects of common ownership with the requirement that private property rights be respected: when an agent decides to stop exploiting her own capital, the latter is shared between the remaining agents in proportion to the productivity of their own capital. The IMPP is in fact the only fixed-path method (as introduced in Friedman, 2002) to satisfy autarkic individual rationality; its path is uniquely determined by the capital contributions of the agents. Thus, our results provide one of the first economic motivation for the asymmetry of fixed-path methods.

JEL-codes: C72 (search for similar items in EconPapers)
Date: 2005-04
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:riceco:2005-05

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