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Towards a Characterization of Second‐Best Pure Strategy Solutions to a Smooth and Symmetric Partnership Problem
Author(s) -
Filipovich Dragan
Publication year - 2002
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00107
Subject(s) - general partnership , characterization (materials science) , curvature , mathematical economics , residual , plaintiff , economics , mathematical optimization , mathematics , law , political science , algorithm , geometry , nanotechnology , materials science , finance
This article makes a start in characterizing the second‐best solution to a smooth, symmetric partnership problem. It derives a more tractable formulation of the problem using a modified version of the condition in Legros and Matthews (1993). Then it uses this formulation to show that the second‐best solution will depend crucially on the curvature (third derivatives) of the production and disutility schedules. Moreover, it shows that the residual claimant solution will be second‐best for sufficiently large partnerships.