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Dissolving a Partnership Efficiently

Peter Cramton (), Robert Gibbons and Paul Klemperer ()

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: Several partners jointly own an asset that may be traded among them. Each partner has a valuation for the asset; the valuations are known privately and drawn independently from a common probability distribution. We characterize the set of all incentive-compatible and interim- individually- rational trading mechanisms, and give a simple necessary and sufficient condition for such mechanisms to dissolve the partnership ex post efficiently. A bidding game is constructed that achieves such dissolution whenever it is possible. Despite incomplete information about the valuation of the asset, a partnership can be dissolved ex post efficiently provided no single partner owns too large a share; this contrasts with Myerson and Satterthwaite's result that ex post efficiency cannot be achieved when the asset is owned by a single party.

Keywords: Auctions; Trading Machanisms; Efficiency; Public Goods (search for similar items in EconPapers)
JEL-codes: C70 C78 D44 D61 (search for similar items in EconPapers)
Pages: 18 pages
Date: 1987, Revised 1998-06-09
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Published in Econometrica, 55:3, May 1987, pages 615-632. Reprinted in Paul Klemperer, ed., The Economic Theory of Auctions, Volume 2, Cheltenham, UK: Edward Elgar, 2000.

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Journal Article: Dissolving a Partnership Efficiently (1987) Downloads
Working Paper: Dissolving a Partnership Efficiently (1985)
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