This paper shows in two ways that the degree to which free-riding diminishes the performance of deterministic partnerships may be less than has been generally thought. First, a necessary and sufficient condition is provided for a partnership to sustain full efficiency. It implies that many non-trivial partnerships sustain efficiency, such as generic ones with finite action spaces, and neoclassical ones with Leontief technologies. Second, approximate efficiency is shown to be achievable in a large class of partnerships, including ones with smooth and monotonic production and disutility functions. Approximate efficiency is achieved by mixed-strategy equilibria: one partner takes, with small probability, an inefficient action. The degree to which efficiency is approximated is restricted only by the amount of liability the partners can bear. Nonetheless, their equilibrium payments are not arbitrarily large.

This article presents a perfectly competitive model of firm boundary decisions and study their interplay with product demand, technology, and welfare. Integration is privately costly but is effective at coordinating production decisions; nonintegration is less costly but coordinates relatively poorly. Output price influences the choice of ownership structure: integration increases with the price level. At the same time, ownership affects output, because integration is more productive than nonintegration. For a generic set of demand functions, equilibrium delivers heterogeneity of ownership and performance among ex ante identical enterprises. The price mechanism transmutes demand shifts into industry-wide reorganizations and generates external effects from technological shocks: productivity changes in some firms may induce ownership changes in others. If the enterprise managers have full title to its revenues, market equilibrium ownership structures are second-best efficient. When managers have less than full revenue claims, equilibrium can be inefficient, with too little integration.

We present sufficient conditions for monotone matching in environments where utility is not fully transferable between partners. These conditions involve not only complementarity in types of the total payoff to a match, as in the transferable utility case, but also monotonicity in type of the degree of transferability between partners. We apply our conditions to study some models of risk sharing and incentive problems, deriving new results for predicted matching patterns in those contexts.