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Dissolving a partnership (un)fairly

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  • John Morgan

Abstract

In an incomplete information, common values setting with risk-neutral agents, we consider mechanisms for allocating the assets of a dissolving partnership where the mechanism designer has no information about the distribution of signals of the agents. We find that the divide and choose mechanism systematically favors the chooser and hence fails on the grounds of fairness. We also examine the fairness properties of the winning and losing bid auctions and show that they systematically favor winning (resp. losing) bidder in ex post allocation of surplus. Finally, we show that a binding arbitration mechanism implements fair allocations. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • John Morgan, 2004. "Dissolving a partnership (un)fairly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(4), pages 909-923, May.
    • Handle: RePEc:spr:joecth:v:23:y:2004:i:4:p:909-923
    DOI: 10.1007/s00199-003-0409-9
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    Citations

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    Cited by:

    1. Andrzej Baranski, 2019. "Endogenous claims and collective production: an experimental study on the timing of profit-sharing negotiations and production," Experimental Economics, Springer;Economic Science Association, vol. 22(4), pages 857-884, December.
    2. Postl, Peter, 2013. "A ‘divide and choose’ approach to compromising," Economics Letters, Elsevier, vol. 119(2), pages 204-209.
    3. Brown, Alexander L. & Van Essen, Matt, 2022. "Breaking-up should not be hard to do! Designing contracts to avoid wars of attrition," European Economic Review, Elsevier, vol. 143(C).
    4. Schweinzer, Paul, 2010. "Sequential bargaining with common values," Journal of Mathematical Economics, Elsevier, vol. 46(1), pages 109-121, January.
    5. Athanassoglou, Stergios & Brams, Steven J. & Sethuraman, Jay, 2010. "A note on the inefficiency of bidding over the price of a share," Mathematical Social Sciences, Elsevier, vol. 60(3), pages 191-195, November.
    6. Van Essen, Matt & Wooders, John, 2016. "Dissolving a partnership dynamically," Journal of Economic Theory, Elsevier, vol. 166(C), pages 212-241.

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