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Imperfect Competition and Corporate Governance

  • Frank Milne

    ()

    (Queen's University)

  • David Kelsey

    ()

    (University of Exeter)

This paper studies corporate governance when a firm operates in imperfect markets. We derive firms’ decisions from utility maximization by individuals. If those involved in decisions are also consumers, the usual monopoly distortion is reduced. Corporate governance can effect the equilibrium in the product (or input) markets. This enables us to endogenize the objective function of the firm. If the firm cannot commit not to change its constitution, we find a Coase-like result where all market power is lost in the limit. We present a more abstract model of governance in the presence of market distortions.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1079.pdf
File Function: First version 2006
Download Restriction: no

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1079.

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Length: 34 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:qed:wpaper:1079
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  1. DeMarzo, Peter M, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 713-34, July.
  2. Steven Tadelis & Jonathan Levin, 2004. "Profit Sharing and the Role of Professional Partnerships," 2004 Meeting Papers 156, Society for Economic Dynamics.
  3. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Erkan YalÁin & Thomas I. Renstr–m, 2003. "Endogenous Firm Objectives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(1), pages 67-94, 01.
  5. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June.
  6. Milne, F, 1974. "Corporate Investment and Finance Theory in Competitive Equilibrium," The Economic Record, The Economic Society of Australia, vol. 50(132), pages 511-33, December.
  7. Egbert Dierker & Birgit Grodahl, 1995. "Profit maximization mitigates competition," Economic Theory, Springer, vol. 7(1), pages 139-160.
  8. Roberts, John & Van den Steen, Eric, 2000. "Shareholder Interests, Human Capital Investment and Corporate Governance," Research Papers 1631, Stanford University, Graduate School of Business.
  9. Frank Milne & David Kelsey, 2005. "Externalities, Monopoly and the Objective Function of the Firm," Working Papers 1078, Queen's University, Department of Economics.
  10. repec:rus:hseeco:72155 is not listed on IDEAS
  11. Katz, Michael L., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Department of Economics, Working Paper Series qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  13. Farrell, Joseph, 1985. "Owner-consumers and efficiency," Economics Letters, Elsevier, vol. 19(4), pages 303-306.
  14. Marco Becht & Patrick Bolton & Ailsa Roell, 2003. "Corporate governance and control," ULB Institutional Repository 2013/13330, ULB -- Universite Libre de Bruxelles.
  15. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 86(1), pages 223-36, March.
  16. 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.
  17. Petra Geraats & Hans Haller, 1998. "Shareholders' choice," Journal of Economics, Springer, vol. 68(2), pages 111-135, June.
  18. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
  19. Nabil Al-Najjar & Sandeep Baliga & David Besanko, 2005. "The Sunk Cost Bias and Managerial Pricing Practices," Levine's Bibliography 666156000000000496, UCLA Department of Economics.
  20. Patrick Bolton & Chenggang Xu, 1999. "Ownership and Managerial Competition: Employee, Customer, and Outside Ownership," CID Working Papers 20, Center for International Development at Harvard University.
  21. De Meza, D. & Lockwood, Ben, 1997. "Does Asset Ownership Always Motivate Managers? The Property Rights Theory of the Firm with Alternating - Offers Bargaining," Discussion Papers 9701, Exeter University, Department of Economics.
  22. 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.
  23. Franklin Allen & Douglas Gale, 1999. "Corporate Governance and Competition," Center for Financial Institutions Working Papers 99-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
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