On the objective of firms under uncertainty with stock markets
In a multi-period, multi-commodity economy with stock markets, we try to extend the work of Drèze [Investment under private ownership: optimality, equilibrium and stability, in: Allocation under Uncertainty; Equilibrium and Optimality, Wiley, New York, 1974, p. 129] to define the behavior of the firms. We exhibit first-order necessary conditions for a constrained Pareto optimal allocation. The financial constraints lead to non-colinear supporting spot prices for the consumers at each node. Nevertheless, the firms are satisfying a first-order necessary condition for profit maximization with respect to a price computed as the Drèze's prices. These prices are also consistent with the sense that the present values of the firms computed with the personal prices of the stockholders and with the Drèze's prices coincide when short sales are allowed. We also show that these conditions are simpler if we consider an allocation at which each consumer maximizes his preferences, when they are smooth. This allows us to give a formal definition for the objective of the firms, which extend the Drèze's criterion. We also discuss different definitions of constrained feasibility, and, we provide the related necessary conditions, which do not differ for the production sector.
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- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2000.
"Objectives of an Imperfectly Competitive Firm: A Surplus Approach,"
Vienna Economics Papers
0007, University of Vienna, Department of Economics.
- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2000. "Objectives of an Imperfectly Competitive Firm: A Surplus Approach," CIE Discussion Papers 2000-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Camelia Bejan, 2008. "The objective of a privately owned firm under imperfect competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(1), pages 99-118, October.
- John Geanakoplos & Michael Magill & Martine Quinzii & J. Dreze, 1988.
"Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete,"
Cowles Foundation Discussion Papers
863, Cowles Foundation for Research in Economics, Yale University.
- Geanakoplos, J. & Magill, M. & Quinzii, M. & Dreze, J., 1990. "Generic inefficiency of stock market equilibrium when markets are incomplete," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 113-151.
- Geanakoplos, J. & Magill, M. & Quinzii, M. & Dreze, J., . "Generic inefficiency of stock market equilibrium when markets are incomplete," CORE Discussion Papers RP 916, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Oussama Lachiri & Jean-Marc Bonnisseau, 2004. "Dreze's Criterion In A Multi-Period Economy With Stock Markets," Royal Economic Society Annual Conference 2004 88, Royal Economic Society.
- Guesnerie, Roger, 1975. "Pareto Optimality in Non-Convex Economies," Econometrica, Econometric Society, vol. 43(1), pages 1-29, January.
- Grossman, Sanford J & Hart, Oliver D, 1979. "A Theory of Competitive Equilibrium in Stock Market Economies," Econometrica, Econometric Society, vol. 47(2), pages 293-329, March.
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