Paying the partners

Abstract

When three or more individuals with disparate talents form a business partnership, they may find it difficult to agree on how their profits will be divided. This paper explores a rule for dividing the profits that depends only on the partners’ estimates of the relative contributions of other partners. No partner can affect his own share by the input that he provides. If there is a division that is consistent with the relative contributions suggested by all partners, then the division rule assigns these shares. We provide the intuition for the division rule and investigate several of its properties.

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Correspondence to Florenz Plassmann.

Additional information

We thank Hervé Moulin, William Shughart, and two anonymous referees for helpful comments.

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Tideman, T.N., Plassmann, F. Paying the partners. Public Choice 136, 19–37 (2008). https://doi.org/10.1007/s11127-008-9276-z

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Keywords

  • Fair division
  • Aggregating opinions
  • Dirichlet distribution

JEL

  • D33
  • D72