Voting in assemblies of shareholders and incomplete markets

An economy with two dates is considered, one state at the first date and a finite number of states at the last date. Shareholders determine production plans by voting - one share, one vote - and at $\rho$ -majority stable stock market equilibria, alternative production plans are supported by at most $\rho \times 100$ percent of the shareholders. It is shown that a $\rho$ -majority stable stock market equilibrium exists if $$ \rho\ \geq\ \dfrac{S-J}{S-J + 1}, $$ where S is the number of states at the last date and J is the number of firms. Moreover, an example shows that $\rho$ -majority stable stock market equilibria need not exist for smaller $\rho$ ’s. Copyright Springer-Verlag Berlin/Heidelberg 2005