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Title:Efficient partnership dissolution under buy/sell clauses PDF Logo
Authors:de Frutos, Maria Angeles
Kittsteiner, Thomas
Issue Date:2004
Series/Report no.:Bonn econ discussion papers 2004,1
Abstract:When a partnership comes to an end partners have to determine the terms of the dissolution. A well known way to do so is by enforcing a buy/sell option. Under its rules one partner has to offer a price for the partnership and the other agent can choose whether she wants to sell her share or buy her partner?s share at this price. It is well known that in a model with private valuations this dissolution rule may generate infficient allocations. However, we here show that if partners negotiate for the advantage of being chooser, then this buy/ sell provision results in an ex-post efficient outcome. This result helps to explain why such provisions are so widely introduced in partnership contracts.
JEL:C72
D44
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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