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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
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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. Marco Becht & Patrick Bolton & Ailsa Roell, 2003. "Corporate governance and control," ULB Institutional Repository 2013/13330, ULB -- Universite Libre de Bruxelles.
  2. 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.
  3. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
  4. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  5. Egbert Dierker & Birgit Grodahl, 1995. "Profit maximization mitigates competition," Economic Theory, Springer, vol. 7(1), pages 139-160.
  6. Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 131-171, January.
  7. 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.
  8. Michael L. Katz., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Economics Working Papers 91-172, University of California at Berkeley.
  9. 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.
  10. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  11. 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.
  12. 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.
  13. Nabil Al-Najjar & Sandeep Baliga & David Besanko, 2006. "The Sunk Cost Bias and Managerial Pricing Practices," 2006 Meeting Papers 851, Society for Economic Dynamics.
  14. Petra Geraats & Hans Haller, 1998. "Shareholders' choice," Journal of Economics, Springer, vol. 68(2), pages 111-135, June.
  15. Frank Milne & David Kelsey, 2005. "Externalities, Monopoly and the Objective Function of the Firm," Working Papers 1078, Queen's University, Department of Economics.
  16. Joseph Farrell, 1985. "Owner-Consumers and Efficiency," Working papers 380, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. 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.
  18. 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.
  19. Roberts, John & Van den Steen, Eric, 2000. "Shareholder Interests, Human Capital Investment and Corporate Governance," Research Papers 1631, Stanford University, Graduate School of Business.
  20. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
  21. repec:rus:hseeco:72155 is not listed on IDEAS
  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. 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.
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