Dissolving a partnership securely

Springer (part of Springer Nature)
Publication Type:
Journal Article
Economic Theory, 2019, 69, (2), pp. 415-434
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© 2019, Springer-Verlag GmbH Germany, part of Springer Nature. We characterize security strategies and payoffs for three mechanisms for dissolving partnerships: the Texas Shoot-Out, the K+ 1 auction, and the compensation auction. A security strategy maximizes a participant’s minimum payoff, and represents a natural starting point for analysis when a participant is either uncertain of the environment or uncertain of whether his rivals will play equilibrium. For the compensation auction, a dynamic dissolution mechanism, we introduce the notion of a perfect security strategy. Such a strategy maximizes a participant’s minimum payoff along every path of play. We show that while a player has many security strategies in the compensation auction, he has a unique perfect security strategy.
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