Intuitive Choice of Cooperative Sharing Mechanisms for Joint Cost Savings: Some Empirical Results

Cooperative sharing arrangements are common phenomena in modern business. Joint ventures are used in a variety of industries, where participants are provided the advantages inter alia of risk sharing, pooling of economic and managerial resources, and synergy. An important issue in any cooperative venture is the mechanism for sharing the common rewards of participation. While some studies have looked at actual ventures, the issue has not been explored empirically when alternative sharing arrangements were also under consideration and the practical considerations of 'fairness', 'reasonableness', and 'understandability' were also present. This study examines sharing arrangements proposed by neutral observers under experimental conditions to a potential cooperative sharing arrangement where these practical considerations are important. The results indicate that the more complex literature solutions were approximated by some neutral observers intuitively, but the more pragmatic literature solutions were chosen by most observers.