Controlled-by-owner Firms, Mobility of Capital and Microeconomic Profit Rate Maximization
When they actively control the firm, owners select the firm that has the best profit rate if the hypothesis of mobility of capital is adopted: controlled-by-owner firms are profit-rate-maximizing when sleeping-owner firms are pure-profit-maximizing. Both types are compared in monopoly, in perfect competition, in classical or in mixed duopoly. Always, controlled-by-owner firms have a lower output than comparable sleeping-owner firms. It only takes a fixed coefficient of equity capital to do that price plays no role for controlled-by-owner firms in perfect competition; in duopoly, it only takes a similar condition plus a linear demand to do that reaction functions vanish. and supply driven models) and the effect of an exogenous factor (final demand or added-value). The note recalls that another method is possible, the comparison of the stability of technical and allocation coefficients, generalized by the biproportional filter: if for a sector, after biproportional filtering, column coefficients are more stable than row coefficients, then this sector is declared as not supply-driven (but one cannot decide that it is demand-driven anyway), and conversely...
|Date of creation:||Mar 1999|
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