Increasing Returns, Knowledge Transfers and the Optimal Duration of Equity Joint Ventures

David John Mayston, Juning Wang

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Rather than being a random unpredictable event, the break-up of an equity joint venture after a finite time can be modelled as the predictable consequence of underlying economic parameters under conditions of complete certainty. The paper examines the impact of a range of important economic parameters on the optimal duration of an equity joint venture, including the degree of economies of scale and knowledge transfer, and discusses the associated interface with relevant empirical evidence and analysis. It also highlights the policy implications of the analysis for the socially optimal corporate tax rate on the joint venture that aligns the privately optimal duration of the joint venture with its social optimum.
Original languageEnglish
Place of PublicationYork, England
PublisherDepartment of Economics and Related Studies, University of York
Number of pages22
VolumeDiscussion Papers in Economics
Publication statusPublished - 2012

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