Control rights in complex partnerships revisited

Abstract

We extend Francesconi and Muthoo (2011) by allowing parities to have different bargaining powers and applying the generalized Nash bargaining solution. We claim that the relative bargaining power plays an important role in determining the optimal allocation of authority. We obtain the generalized results and point to the possibility that the introduction of generalized Nash bargaining may lead to opposite conclusions. Moreover, our model encompasses the case of pure public goods and can also be regarded as a generalization of Schmitz (2013).