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The firm's objective function as a collective choice problem

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  • Frank Milne

Abstract

In this paper I have tried to make the simple point that the shareholder's problem is a collective choice problem. Because of Arrow's Possibility Theorem we must draw the pessimistic conclusion that under very general institutional arrangements there is no Arrow constitution for the firm. Of course, constitutions do exist for theoretical special cases, which have been widely used in the past literature. Although these cases have obvious important roles to play for many positive theoretical problems, they may be too simplistic to explain more complicated phenomenon relating to the financial and organizational structure of firms. Copyright Martinus Nijhoff Publishers 1981

Suggested Citation

  • Frank Milne, 1981. "The firm's objective function as a collective choice problem," Public Choice, Springer, vol. 37(3), pages 473-486, January.
    • Handle: RePEc:kap:pubcho:v:37:y:1981:i:3:p:473-486
    DOI: 10.1007/BF00133746
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    1. GEVERS, Louis, 1974. "Competitive equilibrium of the stock exchange and Pareto efficiency," LIDAM Reprints CORE 198, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Frank Milne, 1979. "Consumer Preferences, Linear Demand Functions and Aggregation in Competitive Asset Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 407-417.
    3. Milne, Frank, 1975. "Choice over asset economies: Default risk and corporate leverage," Journal of Financial Economics, Elsevier, vol. 2(2), pages 165-185, June.
    4. Louis Gevers, 1974. "Competitive Equilibrium of the Stock Exchange and Pareto Efficiency," International Economic Association Series, in: Jacques H. Drèze (ed.), Allocation under Uncertainty: Equilibrium and Optimality, chapter 10, pages 167-191, Palgrave Macmillan.
    5. Slutsky, Steven, 1977. "A voting model for the allocation of public goods: Existence of an equilibrium," Journal of Economic Theory, Elsevier, vol. 14(2), pages 299-325, April.
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    Cited by:

    1. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
    2. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    3. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
    4. L. Marsiliani & X. Liu & Л. Марсилиани & К. Лю, 2017. "Структура Акционерного Капитала И Степень Эксплуатации Нефтяных Месторождений // Share-Ownership Distribution And Extraction Rate Of Petroleum In Oil Fields," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(1), pages 42-53.

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