Partnership dissolution, complementarity, and investment incentives

摘要

Partnerships form in order to take advantage of complementary skills; however, new opportunities may arise that make some partners' skills useless. We analyse partnerships that anticipate possible dissolution under the most commonly advised and widely used dissolution rule known as 'buy-sell provision'. We find that this rule assures neither ex post efficient dissolutions nor ex ante efficient investments. We also discuss whether renegotiations, supplementing the buy-sell provision with the right to veto, or allowing the uninformed partner to set the dissolution price may restore efficiency, and whether pre-emptive requests for dissolution occur in equilibrium.