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Corporate self-regulation of imperfect competition

Author

Listed:
  • Herve Cres

    (New York University in Abu Dhabi)

  • Mich Tvede

    (University of East Anglia)

Abstract

We consider Cournot competition in general equilibrium. Decisions in firms are taken by majority voting. Naturally, interests of voters–shareholders or stakeholders–depend on their endowments and portfolios. We introduce two notions of local Cournot-Walras equilibria to overcome difficulties arising from non-concavity of profit functions and multiplicity of equilibrium prices. We show existence of local Cournot-Walras equilibria, and characterize distributions of voting weights for which equilibrium allocations are Pareto optimal. We discuss the performance of various governances and highlight the importance of financial markets in regulating large firms.

Suggested Citation

  • Herve Cres & Mich Tvede, 2020. "Corporate self-regulation of imperfect competition," University of East Anglia School of Economics Working Paper Series 2020-01, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaeco:2020-01
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    More about this item

    Keywords

    Cournot-Walras equilibrium Majority voting Pareto optimality Shareholder governance Stakeholder democracy Walrasian equilibria;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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