Patrick Legros
Professor of Economics
Efficiency in Partnerships
Journal of Economic Theory, Volume 55, Issue , December 1991, 296-322
Publication year: 1991
We provide the necessary and sufficient condition for a partnership to be able to sustain efficiency when the output is stochastic. When limited liability is imposed, we show that only the level of the average liability of the partnership is important; the individual levels of liability are irrelevant. However, the allocation of the total liability among the partners is crucial when additional conditions such as neutrality or individual rationality are imposed.