Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221349
Authors: 
Legros, Patrick
Matthews, Steven A.
Year of Publication: 
1992
Series/Report no.: 
Discussion Paper No. 991R
Abstract: 
This paper shows in two ways that the degree to which free-riding diminishes the performance of deterministic partnerships may be less than has been generally thought. First, a necessary and sufficient condition is provided for a partnership to sustain full efficiency. It implies that many nontrivial partnerships sustain efficiency, such as generic ones with finite action spaces, and neoclassical ones with Leontief technologies. Second, approximate efficiency is shown to be achievable in a large class of partnerships, including ones with smooth and monotonic production and disutility functions. Approximate efficiency is achieved by mixed strategy equilibria: one partner takes, with small probability, an inefficient action. The degree to which efficiency is approximated is restricted only by the amount of liability the partners can bear. Nonetheless, their equilibrium payments are not arbitrarily large.
Subjects: 
partnership
moral hazard
organizations
JEL: 
D21
D23
L22
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.