Efficient dissolution of partnerships and the structure of control

Past work has shown that asymmetric information and asymmetric ownership affect the possibility of efficient dissolution of partnerships. We show in this paper that control is also a central determinant of the possibility of efficient implementation. We demonstrate this point by analyzing a benchmark case of asymmetric control where a single partner exercises complete control under the status quo partnership. We show that two-person partnerships cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structure, but that this impossibility result can be reversed if the number of partners is sufficiently large. We also show that equal-shares partnerships are not generally the easiest to dissolve when the distribution of control is asymmetric. JEL Codes: C72, D82, L14