Econometrica: Jan, 2010, Volume 78, Issue 1

Mediated Partnerships

https://doi.org/10.3982/ECTA6131
p. 285-308

David Rahman, Ichiro Obara

This paper studies partnerships that employ a mediator to improve their contractual ability. Intuitively, profitable deviations must be attributable, that is, there must be some group behavior such that an individual can be statistically identified as innocent, to provide incentives in partnerships. Mediated partnerships add value by effectively using different behavior to attribute different deviations. As a result, mediated partnerships are necessary to provide the right incentives in a wide range of economic environments.