Residual claim and information acquisition in partnerships

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This paper deals with a partnership facing an investment decision which is facilitated by costly but valuable information acquisition. When agents are identical in preference and endowment, it is shown that a partnership arrangement that makes one agent a residual claimant can sustain optimality, under which the residual claimant acquires information and assumes decision authority. Also, it is shown that different risk aversions and relative efficiency in information gathering determine who should be the residual claimant in an optimal partnership arrangement. Finally, an example of an optimal partnership arrangement is presented, where the residual claimant does not play any role except having a residual claim, hence a (partial) counterexample to Alchian and Demsetz's theory of classical firms.

Original languageEnglish
Pages (from-to)370-376
Number of pages7
JournalInternational Advances in Economic Research
Issue number4
Publication statusPublished - 1 Nov 1995
Externally publishedYes

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