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Partnerships

Joseph Farrell and Suzanne Scotchmer
The Quarterly Journal of Economics
Vol. 103, No. 2 (May, 1988), pp. 279-297
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1885113
Page Count: 19
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Partnerships
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Abstract

A partnership is a coalition that divides its output equally. We show that when partnerships can form freely, a stable or "core" partition into partnerships always exists and is generically unique. When people differ in ability, the equal-sharing constraint inefficiently limits the size of partnerships. We give conditions under which partnerships containing abler people will be larger, and show that if the population is replicated, partnerships may become more or less homogeneous, depending on an elasticity condition. We also examine when the equal-sharing inefficiency vanishes in the limit.

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