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Equal Sharing Rules in Partnerships

Björn Bartling and Ferdinand von Siemens

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that ``peer pressure'' mitigates the arising free-rider problem. This line of reasoning takes the equal sharing rule as exogenously given. The purpose of our paper is to show that with inequity averse partners - a behavioral assumption akin to peer pressure - the equal sharing rule arises endogenously as an optimal solution to the incentive problem in a partnership.

Keywords: equal sharing rule; partnerships; incentives; peer pressure; inequity aversion (search for similar items in EconPapers)
JEL-codes: D20 D86 J54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2007-09
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Related works:
Journal Article: Equal Sharing Rules in Partnerships (2010) Downloads
Working Paper: Equal Sharing Rules in Partnerships (2007) Downloads
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