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Private Benefits and Product Market Competition

Author

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  • Jacques THÉPOT

    (EM Strasbourg Business School, LARGE)

Abstract

This paper analyzes the impact of private benefit extraction on the value of oligopolistic firms. Private benefits are assumed to generate costs that are passed on through the organizational structure and create price distortions in the downstream market for products. We show that this may positively affect the profits (i.e., the market value) of firms because the intensity of the rivalry is curbed by the increase in cost. In an oligopoly situation, private benefit extraction may enhance profits while still generating a welfare loss. This suggests that corporate governance cannot be divorced from competition policy in industries where managerial opportunism generates expropriation costs.

Suggested Citation

  • Jacques THÉPOT, 2013. "Private Benefits and Product Market Competition," Discussion Papers (REL - Recherches Economiques de Louvain) 2013031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:2013031
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    File URL: http://www.jstor.org/stable/42771203
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    Cited by:

    1. Florence THEPOT & Jacques THEPOT, 2017. "Collusion, Managerial incentives and antitrust fines," Working Papers of LaRGE Research Center 2017-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

    More about this item

    Keywords

    Private benefits; Oligopoly; Agency Cost;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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