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Production externalities: internalization by voting

Author

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  • Hervé Crès

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Mich Tvede

    (Department of Economics [Copenhagen] - Faculty of Social Sciences [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet)

Abstract

We study internalization of production externalities in perfectly competitive markets where production plans are decided by majority voting. Since shareholders want firms to maximize dividends of portfolios rather than profits, they are interested in some internalization. Two governances, namely the shareholder governance (one share, one vote) and the stakeholder democracy (one stakeholder, one vote), are compared. We argue that perfect internalization is more likely to be the outcome of the stakeholder democracy than the shareholder governance.

Suggested Citation

  • Hervé Crès & Mich Tvede, 2011. "Production externalities: internalization by voting," SciencePo Working papers Main hal-00972983, HAL.
    • Handle: RePEc:hal:spmain:hal-00972983
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00972983
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    References listed on IDEAS

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