Endogenous Determination of the Liability Rule in Oligopolistic Markets
We address the following question: Why do most large firms select limited liability as their business organizational form in the real world? We construct a two-stage game. In the first stage, each of the oligopolistic firms chooses its business organizational form, while in the second stage, each behaves in a Cournot fashion. The following conclusions are established. (1) Even if an unlimited liability firm is viable, all firms become limited liability entities in equilibrium. (2) The equilibrium industry configuration, where all firms become limited liability entities, achieves efficiency in the second-best sense.
|Date of creation:||Jul 2012|
|Date of revision:||Jul 2012|
|Contact details of provider:|| Postal: |
Web page: http://www-econ.kwansei.ac.jp/~econ/index_e.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:kgu:wpaper:91. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toshihiro Okada)
If references are entirely missing, you can add them using this form.