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Endogenous Formation of Joint Ventures with Efficiency Gains
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Endogenous Formation of Joint Ventures with Efficiency Gains

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  • Sang-Seung Yi

Abstract

I study stable structures of efficiency-enhancing joint ventures among symmetric firms. Efficiency gains that accrue to a joint venture are assumed to increase with its size. The socially efficient industrywide joint venture is the stable outcome when membership of a joint venture is open to outside firms, but typically not when membership can be restricted. Members of a large joint venture want to restrict membership for strategic reasons -- e.g., in order to keep rival firms' costs high. Side payments among firms do not eliminate the strategic incentives of members of a large joint venture to limit membership

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  • Sang-Seung Yi, 1998. "Endogenous Formation of Joint Ventures with Efficiency Gains," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 610-631, Autumn.
    • Handle: RePEc:rje:randje:v:29:y:1998:i:autumn:p:610-631
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