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Competing for Ownership

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  • Patrick Legros

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  • Andrew F. Newman

Abstract

We develop a tractable model of the allocation of ownership and control in firms in competitive markets that permits study of how the scarcity of assets in the market translates into control allocations inside the organization. The model identifies a price-like mechanism whereby local liquidity or productivity shocks propagate and lead to widespread organizational restructuring. 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. Shocks to the first two moments of the liquidity distribution have multiplier effects on the corresponding moments of the distribution of ownership.

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Bibliographic Info

Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 07-02.

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Length: 39 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:edb:cedidp:07-02

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