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Ownership structure and control in incomplete market economies with transferable utility

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  • Egbert Dierker

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  • Hildegard Dierker

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    Abstract

    We consider an economy with incomplete markets and a single firm and assume that utility can be freely transferred in the form of the initially available good 0 (quasilinearity). In this particularly simple and transparent framework, the objective of a firm can be defined as the maximization of the total utility of its control group $${\fancyscript C}$$ measured in units of good 0. We analyze how the size and the composition of $${\fancyscript C}$$ influence the firm’s market behavior and state conditions under which the firm sells its output at prices which are at, above, or below marginal costs, respectively. We discuss the assumption of competitive price perceptions and point out important differences between the concepts of a Drèze and of a Grossman-Hart equilibrium that occur in spite of the close similarity of the formulas which define them. Copyright Springer-Verlag 2012

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    File URL: http://hdl.handle.net/10.1007/s00199-011-0621-y
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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 51 (2012)
    Issue (Month): 3 (November)
    Pages: 713-728

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    Handle: RePEc:spr:joecth:v:51:y:2012:i:3:p:713-728

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    Related research

    Keywords: Firm objectives; Market structure and pricing; Incomplete markets with production; Drèze equilibria; Constrained efficiency; Minimal efficiency; D2; D4; D21; D52; D61;

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    1. Sanford Grossman & Oliver Hart, 1978. "A theory of competitive equilibrium in stock market economies," Special Studies Papers 115, Board of Governors of the Federal Reserve System (U.S.).
    2. Dierker, Egbert & Dierker, Hildegard, 2010. "Welfare and efficiency in incomplete market economies with a single firm," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 652-665, September.
    3. Egbert Dierker & Hildegard Dierker, 2010. "Drèze equilibria and welfare maxima," Economic Theory, Springer, vol. 45(1), pages 55-63, October.
    4. DeMarzo, Peter M, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 713-34, July.
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