
Abstract
Partnerships are the prevalent organizational form in many industries. Most partnerships share profits equally among the partners. Following Kandel and Lazear (1992) it is often argued that ``peer pressure'' mitigates the arising free-rider problem. This line of reasoning takes the equal sharing rule as exogenously given. The purpose of our paper is to show that with inequity averse partners - a behavioral assumption akin to peer pressure - the equal sharing rule arises endogenously as an optimal solution to the incentive problem in a partnership.
Item Type: | Paper |
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Keywords: | equal sharing rule, partnerships, incentives, peer pressure, inequity aversion |
Faculties: | Economics Economics > Munich Discussion Papers in Economics Economics > Munich Discussion Papers in Economics > Micro-Economics |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
JEL Classification: | D20, D86, J54 |
URN: | urn:nbn:de:bvb:19-epub-2027-1 |
Language: | English |
Item ID: | 2027 |
Date Deposited: | 17. Sep 2007 |
Last Modified: | 08. Nov 2020, 11:12 |