Jacques H. Drèze () (CORE, Université Catholique de Louvain - Belgium) Oussama Lachiri () (Centre d'Economie de la Sorbonne) Enrico Minelli () (Dipartimento di Scienze Economiche, Università di Brescia - Italia)
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We propose an objective for the firm in a general model of production economies extending over time under uncertainty and with incomplete markets. Trading in commodities and shares of stock occurs sequentially on spot markets at all date-events. We derive the objective of the firm from the assumption of initial-shareholders efficiency. Each shareholder is assumed to communicate to the firm her marginal valuation of profits all date events (expressed in terms of initial resources). In defining her own marginal valuation of the firm's profits, a shareholder will take two elements into consideration. To evaluate the direct impact of a change in dividends the shareholder uses her own vector of marginal rates of substitution for revenue across date-events. In addition, the shareholder will take into account the impact of future dividends on the firm's stock price when she trades shares. To predict the effect on the stock price, she uses a (possibly different) state price process, her price theory. The only restriction that we impose on consumers' price theories is that they should be compatible with the observed equilibrium : given the equilibrium prices and production plans, a price theory must satisfy a no-arbitrage condition. The firm computes its own shadow prices for profits at all date-events by simply adding up the marginal valuations of all its initial shareholders. We prove existence of an equilibrium.
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