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Ownership structure and control in incomplete market economies with transferable utility

We consider an economy with incomplete markets and a single ¯rm and assume that utility can be freely transferred in the form of the ini- tially available good 0 (quasilinearity). In this particularly simple and transparent framework, the objective of a firm can be defined as the max- imization of the total utility of its control group C measured in units of good 0. We analyze how the size and the composition of C influences the rm's market behavior and state conditions under which the firm sells its output at prices which are at, above, or below marginal costs, respectively. We discuss the assumption of competitive price perceptions and point out important differences between the concepts of a Dreze and of a Grossman- Hart equilibrium that occur in spite of the close similarity of the formulas which define them.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie1106.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 1106.

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Date of creation: Mar 2011
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Handle: RePEc:vie:viennp:1106
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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  1. Grossman, Sanford J & Hart, Oliver D, 1979. "A Theory of Competitive Equilibrium in Stock Market Economies," Econometrica, Econometric Society, vol. 47(2), pages 293-329, March.
  2. Bejan, Camelia & Bidian, Florin, 2009. "Ownership Structure and Efficiency in Large Economies," MPRA Paper 17677, University Library of Munich, Germany.
  3. Egbert Dierker & Hildegard Dierker, 2010. "Drèze equilibria and welfare maxima," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 55-63, October.
  4. Peter M. DeMarzo, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 713-734.
  5. Dierker, Egbert & Dierker, Hildegard, 2010. "Welfare and efficiency in incomplete market economies with a single firm," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 652-665, September.
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