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Title: Endogenous Firm Objectives
Contributor(s): Yalcin, Erkan (author); Renstrom, Thomas I (author)
Publication Date: 2003
DOI: 10.1111/1467-9779.00122
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Abstract: We analyze the behavior of a monopolistic firm in general equilibrium when the firm's decisions are taken through shareholder voting. We show that, depending on the underlying distribution, rational voting may imply overproduction as well as underproduction, relative to the efficient level. Any initial distribution of shares is an equilibrium, if individuals do not recognize their influence on voting when trading shares. However, when they do, and there are no short-selling constraints, the only equilibrium is the efficient one. With short-selling constraints typically underproduction occurs. It is not market power itself causing underproduction, but the inability to perfectly trade the rights to market power.
Publication Type: Journal Article
Source of Publication: Journal of Public Economic Theory, 5(1), p. 67-94
Publisher: Wiley-Blackwell Publishing Inc
Place of Publication: London, United Kingdom
ISSN: 1467-9779
Field of Research (FOR): 140104 Microeconomic Theory
140207 Financial Economics
140213 Public Economics- Public Choice
140209 Industry Economics and Industrial Organisation
Peer Reviewed: Yes
HERDC Category Description: C1 Refereed Article in a Scholarly Journal
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Appears in Collections:Journal Article

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