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Partnership dissolution with interdependent values
Author(s) -
Jehiel Philippe,
Pauzner Ady
Publication year - 2006
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2006.tb00001.x
Subject(s) - subsidy , general partnership , interdependence , welfare , economics , microeconomics , class (philosophy) , business , public economics , law and economics , market economy , finance , political science , law , computer science , artificial intelligence
We study partnership dissolution when valuations are interdependent and only one party is informed. In contrast with the case of private values (Cramton, Gibbons, and Klemperer, 1987), in which efficient trade is feasible whenever initial shares are about equal, there exists a wide class of situations in which full efficiency cannot be reached. In these cases, (i) the subsidy required to restore the first best is minimal when the entire ownership is allocated initially to one of the parties, and (ii) ruling out external subsidies, the second‐best welfare is maximized when one of the parties initially has full ownership .