Asymptotic Efficiency of Risk Averse Partnerships

Holmstrom (1982) considered a group of agents who jointly produce some output and showed that if the agents are required to balance the budget then the first best, or Pareto efficient, allocation cannot be obtained as an equilbrium relative to any sharing rule. Recent research on risk-neutral partnerships, in both the deterministic and stochastic case, yields a more positive picture about the possibility of sustaining efficient outcomes as equilibria of partnership games.