Efficient dissolution of partnerships and the structure of control

In this paper, we study efficient dissolution of partnerships in a context of incomplete information. We generalize the results of Cramton, Gibbons and Klemperer (1987) to situ-ations where the partnership takes on a common value that may depend upon all partners’ types, so that each partner’s individual rationality constraint depends on types other than his own. We show that in this case not only the distribution of ownership, emphasized in the earlier literature, but also the distribution of control within an organization matter to determine the possibility of efficient dissolution. We underscore this point by showing that two-person partnerships where one partner exercises complete control cannot be dissolved efficiently with any incentive compatible, individually rational mechanism, regardless of the ownership structure