Partnership Dissolution: Information and Efficiency

This paper analyses the efficiency of the Texas shootout and ½-auction partnership dissolution mechanisms when one of the partners has a chance to learn the other partner’s valuation. It shows that the efficiency of the Texas shootout mechanism positively depends on the probability of one partner successfully learning the other’s valuation while for the ½-auction mechanism such a relationship is not monotonic: The outcome is efficient when the probability of observing the other partner’s signal is zero or one, but is inefficient for all intermediate values.