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Corporate Equilibrium Properties of a Centralized Objective Function GEI Model

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  • Pascal Christian Stiefenhofer

Abstract

We introduce an incomplete markets general equilibrium model with idiosyncratic risk, where production is financed via stock market, and where the ownership structure endogenized. This model is a variation of Drèze (1974), Grossman and Hart (1979), and Magill and Quinzii (2002). The paper discusses two main corporate equilibrium properties. It shows that (i) the class of centralized objective functions introduces a further source of inefficiency into the organization of production, and (ii) the indeterminacy of corporate equilibria. (iii) It further shows the separation of the economic decisions of the agents.

Suggested Citation

  • Pascal Christian Stiefenhofer, 2010. "Corporate Equilibrium Properties of a Centralized Objective Function GEI Model," Discussion Papers 10/18, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:10/18
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