Efficiency in complementary partnerships with competition
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- Working papers (SNF) 
This paper investigates a market with strictly complementary inputs, with a particular emphasis on how efficiency can be implemented when the productive firms undertake unobservable effort. It is shown that simple linear sharing rules cannot implement socially optimal effort, but a modified linear sharing rule can implement the first-best outcome and a restricted linear sharing rule can be used to implement the second-best outcome. In addition, problems associated with commitment to the sharing rule is discussed.