TY - JOUR
T1 - Partnership dissolution with interdependent values
AU - Jehiel, Philippe
AU - Pauzner, Ady
PY - 2006
Y1 - 2006
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=33748329476&partnerID=8YFLogxK
U2 - 10.1111/j.1756-2171.2006.tb00001.x
DO - 10.1111/j.1756-2171.2006.tb00001.x
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AN - SCOPUS:33748329476
SN - 0741-6261
VL - 37
SP - 1
EP - 22
JO - RAND Journal of Economics
JF - RAND Journal of Economics
IS - 1
ER -