Some Comments on Free-Riding in Leontief Partnerships
نویسنده
چکیده
Holmström [1982] showed that free-riding is inevitable in partnerships where inputs are substitutes. Legros & Matthews [1993] and Vislie [1994] showed that when inputs are strict complements (Leontief technology), free-riding can be avoided with a linear sharing rule. This paper considers the robustness and some extensions of the positive result of LMV. First, I show that LMV’s result is not robust to the introduction of participation constraints and limited liability. However, I construct a novel rule that mitigates that problem. Second, I perturb the (deterministic) model of LMV. It turns out that free-riding is avoidable with noise added to joint output, while free-riding is inevitable when noise is added to individual productivity.
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