Efficiency of joint enterprises with internal bargaining

Lambertini, Luca ; Poddar, Sougata ; Sasaki, Dan (2000) Efficiency of joint enterprises with internal bargaining. DOI 10.6092/unibo/amsacta/686.
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Abstract

In this paper we take a close look at those strategic incentives arising in a situation where firms share the costs and profits in a multi-firm project, and bargain for their respective (precommitted) split of cost- and profit-shares. We establish that, when each firm’s effort contribution to the joint undertaking is mutually observable (which is often the case in closely collaborative operations) and hence can form basis of the contingent cost- and profit-sharing scheme, it is not the gross economic efficiency but the super-/sub-additivity of the nett returns from effort that directly affects the sustainability of a profile of firms’ effort contributions. The (in)efficiency result we obtain in this paper is of different nature from so-called "free riding" or "team competition" problems : the set of sustainable outcomes with bargaining over precommetted cost- and profit-shares is generally neither a superset nor a subset of the sustainable set without bargaining.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Poddar, Sougata
Sasaki, Dan
Keywords
cost sharing profit sharing repayment subgame perfection
Subjects
DOI
Deposit date
17 Jun 2004
Last modified
17 Feb 2016 14:01
URI

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