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Private Benefits and Product Market Competition

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  • Jacques Thépot

Abstract

The impact of private benefits extraction on the values of oligopolistic firms is analyzed. Private benefits are assumed to generate costs which are passed through the organizational structure and create price distortion in the downstream product market. We prove that this may affect the profit (i.e. the market value) of the firms in a positive sense since the intensity of rivalry is curbed by the cost increase. In oligopoly, private benefits extraction may enhance the 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. JEL Classification: G38, D43.

Suggested Citation

  • Jacques Thépot, 2013. "Private Benefits and Product Market Competition," Recherches économiques de Louvain, De Boeck Université, vol. 79(3), pages 5-24.
    • Handle: RePEc:cai:reldbu:rel_793_0005
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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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