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Equilibrium in a Stock Market Economy with Shareholder Voting

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  • Sadanand, Asha B
  • Williamson, John M

Abstract

This paper demonstrates the existence of a shareholders' equilibrium for a two-period stock-market economy in which there may be fewer securities than states of the world. There are two allocation mechanisms in the economy: firms' owners may vote (direction restricted majority rule) to change firms' production plans across states while keeping shareholdings fixed, and individuals may trade their shares and stocks of a current production/consumption good while keeping firms' plans fixed. A shareholders' equilibrium is a set of firms' plans, and an allocation of shares and the current good which are stable with respect to both mechanisms. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Sadanand, Asha B & Williamson, John M, 1991. "Equilibrium in a Stock Market Economy with Shareholder Voting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 1-35, February.
  • Handle: RePEc:ier:iecrev:v:32:y:1991:i:1:p:1-35
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    Cited by:

    1. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
    2. Crès, Hervé & Tvede, Mich, 2009. "Production in incomplete markets: Expectations matter for political stability," Journal of Mathematical Economics, Elsevier, vol. 45(3-4), pages 212-222, March.
    3. Thomas Renstrom & Erkan Yalcin, 2002. "Endogenous Firm Objectives," Industrial Organization 0204001, EconWPA.
    4. repec:spo:wpecon:info:hdl:2441/10281 is not listed on IDEAS
    5. Philippe De Donder & Michel Le Breton & Eugenio Peluso, 2012. "Majority Voting in Multidimensional Policy Spaces: Kramer–Shepsle versus Stackelberg," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(6), pages 879-909, December.
    6. Hervé Crès & Mich Tvede, 2005. "Portfolio Diversification and Internalization of Production Externalities through Majority Voting," Working Papers hal-01065579, HAL.
    7. Gregory K. Dow & Gilbert L. Skillman, 2007. "Collective Choice and Control Rights in Firms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(1), pages 107-125, February.
    8. Renström, Thomas I & Yalcin, Erkan, 2002. "Endogenous Firm Objectives," CEPR Discussion Papers 3361, C.E.P.R. Discussion Papers.
    9. CRES, Hervé & TVEDE, Mich, 2004. "The Dreze and Grossman-Hart criteria for production in incomplete markets: Voting foundations and compared political stability," Les Cahiers de Recherche 794, HEC Paris.
    10. Hervé Crès, 2006. "A Geometric Study of Shareholders’ Voting in Incomplete Markets: Multivariate Median and Mean Shareholder Theorems," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 27(2), pages 377-406, October.
    11. Kelsey, David & Milne, Frank, 1996. "The existence of equilibrium in incomplete markets and the objective function of the firm," Journal of Mathematical Economics, Elsevier, vol. 25(2), pages 229-245.
    12. Hervé Crès & Mich Tvede, 2005. "Portfolio Diversification and Internalization of Production Externalities through Majority Voting," Sciences Po publications 816/2005, Sciences Po.
    13. Thomas Renstrom & Erkan Yalcin, "undated". "Endogeneous Firm Objectives," Wallis Working Papers WP27, University of Rochester - Wallis Institute of Political Economy.
    14. Hervé Crès & Mich Tvede, 2009. "Production in incomplete markets: Expectations matter for political stability," Post-Print hal-01022731, HAL.
    15. Petra Geraats & Hans Haller, 1998. "Shareholders' choice," Journal of Economics, Springer, vol. 68(2), pages 111-135, June.
    16. repec:spo:wpecon:info:hdl:2441/10267 is not listed on IDEAS

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