Efficiency in partnerships

Patrick Legros and Hitoshi Matsushima

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: We provide the necessary and sufficient condition for a partnership to be able to sustain efficiency when the output is stochastic. When limited liability is imposed, we show that only the level of the average liability of the partnership is important; the individual levels of liability are irrelevant. However, the allocation of the total liability among the partners is crucial when additional conditions such as neutrality or individual rationality are imposed.

Date: 1991
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Published in: Journal of Economic Theory (1991) v.55 n° 2,p.296-322

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