Vince-

Here is the basic idea I was alluding to:

Suppose a car dealer promised to "match any advertised price." Then his 
competitor would feel the need to respond in kind. And so on, until all 
dealers advertised they would "match any advertised price." Now, consider one 
of these dealer's decision to perhaps lower his prices. If he does so, 
everyone will immediately match his price, so his market share will remain 
unchanged, at whatever it was before, but his revenues (and all other dealers 
as well) would be lowered by the amount of his price reduction. So, the 
dealer rationally decides not to lower his prices to try to sell more cars.

Now, suppose a limited partnership, where the partners contract to "control" 
who they are in business with, by putting a "right of first refusal" clause 
into the partnership's papers, whereby any partner wishing to sell his 
interests must offer the remaining partners the right to match any offer the 
partner received from outside for his shares. Now, suppose you are an 
outsider, considering doing your due diligence in the thought you might want 
to buy into the partnership. You know if your offer is a "good" one from your 
perspective, offering you the prospects of a fair rate of return, the 
existing partners will match it, and you will get nothing in the deal but you 
will have paid, from your own pocket, for your due diligence. Conversely, if 
you offer too much for the shares, then the other partners will not match 
your offer and you will then realize you overpaid. In neither case can you 
credibly assume you know more about the business than do the current 
partners. So, you (basically) don't make an offer.  So, a partner's shares 
are seriously devalued by his partners having the right to match any offers 
he receives for them. The "right of first refusal" clause precludes 
economically efficient rebalancing of portfolios by rendering the shares 
(essentially) illiquid.

Clayton