Equal Sharing Rules in Partnerships
Björn Bartling and
Ferdinand von Siemens
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich
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
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Journal Article: Equal Sharing Rules in Partnerships (2010)
Working Paper: Equal Sharing Rules in Partnerships (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:217
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