Mechanisms for dividing labor and sharing revenue in joint ventures |
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Authors: | Email author" target="_blank">Keith?WaehrerEmail author |
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Institution: | (1) Economic Analysis Group, Room 10-000, U.S. Department of Justice, 600 E Street, NW, DC 20530 Washington,, USA |
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Abstract: | Organizing the productive efforts of firms participating in a joint venture involves assigning firms to tasks according to abilities. A multidimensional incentive problem arises when abilities are private information. In any equilibrium, it is better to be a firm who is a specialist rather than a generalist. However, generalists can expect to receive a larger allocation of revenue. If at least one firm is decisive to the profitability of the joint venture (i.e., if it can make a credible cost announcement that implies the joint venture earns zero profit), then the joint venture will not be able to implement a profit maximizing or cost minimizing production plan.Received: 21 March 2002, Accepted: 26 February 2004, JEL Classification:
D82, C78, L23Any views expressed in this paper are not purported to reflect those of the United States Department of Justice. This paper benefited from the helpful comments of a referee and an associated editor. |
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Keywords: | Mechanism design joint venture team production |
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