Some Comments on Free-Riding in Leontief Partnerships

Hans Krogh Hvide

doi:10.1093/ei/39.3.467

Some Comments on Free-Riding in Leontief Partnerships

Hans Krogh Hvide

Economics

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

Holmstrom (Bell Journal of Economics, 13, 1982, 324-40) showed that free-riding is inevitable in partnerships where inputs are substitutes. Legros and Matthews (Review of Economic Studies, 68, 1993, 599-611) and Vislie (Journal of Economics Behavior anti Organization 23, 1994, 83-91) 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.

Original language	English
Pages (from-to)	467-473
Number of pages	6
Journal	Economic Inquiry
Volume	39
Issue number	3
DOIs	https://doi.org/10.1093/ei/39.3.467
Publication status	Published - Jul 2001

Keywords

COORDINATION FAILURE
MORAL HAZARD
EFFICIENCY
TEAMS
ORGANIZATION
UNCERTAINTY

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10.1093/ei/39.3.467

Cite this

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abstract = "Holmstrom (Bell Journal of Economics, 13, 1982, 324-40) showed that free-riding is inevitable in partnerships where inputs are substitutes. Legros and Matthews (Review of Economic Studies, 68, 1993, 599-611) and Vislie (Journal of Economics Behavior anti Organization 23, 1994, 83-91) 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.",

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AB - Holmstrom (Bell Journal of Economics, 13, 1982, 324-40) showed that free-riding is inevitable in partnerships where inputs are substitutes. Legros and Matthews (Review of Economic Studies, 68, 1993, 599-611) and Vislie (Journal of Economics Behavior anti Organization 23, 1994, 83-91) 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.

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KW - MORAL HAZARD

KW - EFFICIENCY

KW - TEAMS

KW - ORGANIZATION

KW - UNCERTAINTY

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Some Comments on Free-Riding in Leontief Partnerships

Abstract

Keywords

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