Advanced Search
MyIDEAS: Login

Freezeout, Compensation Rules and Voting Equilibria

Contents:

Author Info

  • Christian At

    ()
    (CRESE, Université de Franche-comté)

  • Sylvain Béal

    ()
    (CRESE, Université de Franche-Comté)

  • Pierre-Henri Morand

    ()
    (Université d'Avignon et des pays de Vaucluse)

Abstract

A single proposer has the opportunity to generate a surplus by taking the assets of a group of individuals. These individuals are called upon to vote for accepting or rejecting the monetary offer made to them by the proposer, who needs the agreement of a qualified majority. The voters who rejected the offer while the qualified majority is met are frozen out but they can claim a compensation in exchange for their asset. This article analyses how compensation rules influence both the votes and the offer made by the proposer. We find that unanimity rule or compensation equals to the proposal or voters' initial wealth maximize the expected social surplus that entirely accrues to the proposer. We show that increasing the offer does not always increase the probability of acceptance, in sharp contrast to many close models. We identify the optimal offer when the compensation does not depend on the proposal. Increasing the compensation always reduces the expected social surplus and the expected profit of the proposer, but does not always benefit to the voters. Reinforcing the qualified majority always increases the expected profit of the proposer, and can decrease both the expected social surplus and the expected utility of the voters. When the compensation is based on the proposal we find that the success or the failure of the proposition depends crucially of the compensation's shape.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://crese.univ-fcomte.fr/WP-2013-04.pdf
File Function: First version, 2013
Download Restriction: no

Bibliographic Info

Paper provided by CRESE in its series Working Papers with number 2013-04.

as in new window
Length: 16 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:crb:wpaper:2013-04

Contact details of provider:
Postal: 45 D Avenue de l'observatoire, 25030 Besançon cedex
Phone: 03 81 66 65 80
Fax: 03 81 66 65 76
Web page: http://crese.univ-fcomte.fr/
More information through EDIRC

Related research

Keywords: Voting games; Compensations; Fairness; Freezeout; Regulatory takings; Debt restructuring;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Yakov Amihud & Marcel Kahan & Rangarajan K. Sundaram, 2004. "The Foundations of Freezeout Laws in Takeovers," Journal of Finance, American Finance Association, vol. 59(3), pages 1325-1344, 06.
  2. Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 89-110.
  3. Miceli,Thomas J., 2011. "The Economic Theory of Eminent Domain," Cambridge Books, Cambridge University Press, number 9780521182973, November.
  4. Holmstrom, Bengt & Nalebuff, Barry, 1992. "To the Raider Goes the Surplus? A Reexamination of the Free-Rider Problem," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(1), pages 37-62, Spring.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:crb:wpaper:2013-04. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Denis Jeanney).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.