Equal Sharing Rules in Partnerships

Authors: Bartling, Björn; von Siemens, Ferdinand A.

Source: Journal of Institutional and Theoretical Economics JITE, Volume 166, Number 2, June 2010 , pp. 299-320(22)

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Abstract:

Partnerships are the prevalent organizational form in many industries. Profits are most frequently shared equally among the partners. The purpose of our paper is to provide a rationale for equal sharing rules. We show that with inequity-averse partners the equal sharing rule is the unique sharing rule that maximizes the partners' incentives to exert effort. We further show that inequity aversion can enhance efficiency in partnerships of given size, but that it can also cause partnerships to be inefficiently small.

Document Type: Research article

DOI: http://dx.doi.org/10.1628/093245610791342987

Publication date: 2010-06-01

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Founded as Zeitschrift f�r die gesamte Staatswissenschaft in 1844.

As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.
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