Principals and Partners: The Structure of Syndicates

Daniel Vincent

No 909, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: This paper analyzes conditions, which help to determine the optimal organization of a syndicate when the input of members of the syndicate is not observable. If the cost of monitoring agents' actions is free or if a principal will agree to operate an optimal incentive scheme at no cost, then well-known results tell us that a principal-based hierarchy is optimal. However, when all members of a syndicate share equally in the surplus generated by the syndicate including the principal, this cost must be borne in mind in forming the optimal organization. Sometimes it is preferable to bear the costs of shirking rather than to share the gains of the enterprise with another agent. This paper shows that the bias towards such partnerships varies in a predictable manner determined by the parameters of the environment. In particular, it shows that while growth of an enterprise might provide an incentive to form a hierarchy, increased efficiency of the agents through learning for instance provide countering biases favouring the formation of a partnership.

Date: 1991-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.kellogg.northwestern.edu/research/math/papers/909.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nwu:cmsems:909

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014. Contact information at EDIRC.
Bibliographic data for series maintained by Fran Walker ( this e-mail address is bad, please contact ).