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Competing for Ownership

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Author Info

  • Patrick Legros

    (ECARES, Université Libre de Bruxelles; and CEPR)

  • Andrew F. Newman

    ()
    (Boston University)

Abstract

We develop a tractable model of the allocation of control in firms in competitive markets, which permits us to study how changes in the scarcity of assets, skills or liquidity in the market translate into control inside the organization. Firms will be more integrated when the terms of trade are more favorable to the short side of the market, when liquidity is unequally distributed among existing firms and following a uniform increase in productivity. The model identifies a price-like mechanism whereby local liquidity or productivity shocks propagate and lead to widespread organizational restructuring.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2007-003.

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Length: 36 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:bos:wpaper:wp2007-003

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