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Corporate self-regulation of imperfect competition

Author

Listed:
  • Hervé Crès

    (New York University in Abu Dhabi)

  • Mich Tvede

    (University of East Anglia, Norwich Research Park)

Abstract

We consider Cournot competition in general equilibrium. Decisions in firms are taken by majority voting. Naturally, interests of voters—shareholders or stakeholders—depend on their endowments and portfolios. Indeed, voters in every firm are concerned about the return on their portfolios rather than their shares in the firm. We introduce two notions of local Cournot–Walras equilibria to overcome difficulties arising from non-concavity of profit functions and multiplicity of equilibrium prices. We show existence of local Cournot–Walras equilibria, and characterize distributions of voting weights for which equilibrium allocations are Pareto optimal. We discuss the efficiency of various governance modes and highlight the importance of financial markets in regulating large firms.

Suggested Citation

  • Hervé Crès & Mich Tvede, 2023. "Corporate self-regulation of imperfect competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1181-1205, May.
    • Handle: RePEc:spr:joecth:v:75:y:2023:i:4:d:10.1007_s00199-022-01443-3
    DOI: 10.1007/s00199-022-01443-3
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    References listed on IDEAS

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    1. Maria Gabriella Graziano & Vincenzo Platino, 2024. "A measure of social loss for production economies with externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 443-474, September.

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    More about this item

    Keywords

    Cournot–Walras equilibrium; Majority voting; Pareto optimality; Shareholder governance; Stakeholder democracy; Walrasian equilibria;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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