W . ALLEN WALLIS Institute of POLITICAL ECONOMY UNIVERSITY OF ROCHESTER Endogeneous Firm Objectives
نویسندگان
چکیده
We analyze the behavior of a monopolistic firm in general equilibrium when the firm’s decision 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.
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Eric Hanushek is Professor of Economics and of Public Policy and Director of the W. Allen Wallis Institute of Political Economy at the University of Rochester. He joined the University of Rochester in 1978 and has previously been Director of its Public Policy Analysis Program and Chairman of the Department of Economics. From 1983 through 1985, he was Deputy Director of the Congressional Budget ...
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