Abstract: This article examines profit-sharing arrangements in joint ventures. In recent years increasing use has been made of joint ventures as an effective form of achieving synergies. Joint ventures are formed in diverse areas for the purpose of accomplishing various goals. The two most important features that characterize this form of business combination are joint control and the synergistic nature of cooperation. Joint control implies that the investors jointly contribute and control resources. This feature of joint control distinguishes joint ventures from other forms of business combinations such as mergers, takeovers and acquisition of subsidiaries in which the relationship is one-sided. The efficient direct-revelation mechanisms will require the joint venture management to specify the transfer function and production level so that expected profit is maximized subject to the feasibility requirements. In the ex ante optimum, the parents agree to the mechanism before they receive their private information.

　　Subjects: JOINT ventures; PRODUCER cooperatives; EMPLOYEE ownership; CAPITALISTS & financiers; CONTROL theory; CAFETERIA benefit plans