Affordable Access

Some Comments on Free-Riding in Leontief Partnerships.



Holmstrom (1982) showed that free-riding is inevitable in partnerships where inputs are substitutes. Legros and Matthews (1993) and Vislie (1994) showed that when inputs are strict complements (Leontief technology), free-riding can be avoided with a linear sharing rule. This paper considers the robustness and some extensions of the positive result of these articles. First, I show that Legros and Matthews's and Vislie's results are not robust to the introduction of participation constraints and limited liability. However, I construct a novel rule that mitigates that problem. Second, I perturb the (deterministic) model of the other authors. It turns out that free-riding is avoidable with noise added to joint output and is inevitable when noise is added to individual productivity. Copyright 2001 by Oxford University Press.

There are no comments yet on this publication. Be the first to share your thoughts.


Seen <100 times