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Journal Article

Dissolving a Partnership Efficiently

Peter Cramton, Robert Gibbons and Paul Klemperer
Econometrica
Vol. 55, No. 3 (May, 1987), pp. 615-632
Published by: The Econometric Society
DOI: 10.2307/1913602
Stable URL: http://www.jstor.org/stable/1913602
Page Count: 18
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Dissolving a Partnership Efficiently
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Abstract

Several partners jointly own an asset that may be traded among them. Each partner has a valuation for the asset; the valuations are known privately and drawn independently from a common probability distribution. We characterize the set of all incentive-compatible and interim-individually-rational trading mechanisms, and give a simple necessary and sufficient condition for such mechanisms to dissolve the partnership ex post efficiently. A bidding game is constructed that achieves such dissolution whenever it is possible. Despite incomplete information about the valuation of the asset, a partnership can be dissolved ex post efficiently provided no single partner owns too large a share; this contrasts with Myerson and Satterthwaite's result that ex post efficiency cannot be achieved when the asset is owned by a single party.

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