Competitive Equilibrium in Markets for Votes

Abstract

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Trading and Shareholder Democracy

“…Put differently, the inability of voting to reflect the intensity of preferences can be exacerbated by trading when traded securities combine cash flow rights and voting rights. This conclusion is different from that in the political economy literature, which highlights that separately trading the voting rights can alleviate this limitation of standard voting rules (e.g., Casella, Llorente‐Saguer, and Palfrey (2012)).…”

“…Esö, Hansen, and White (2014) argue that empty voting may improve information aggregation. The political science literature investigates vote‐trading as a mechanism to address a limitation of standard voting rules, which fail to reflect the intensity of preferences; this limitation manifests in our model through the wedge between the median voter and the average post‐trade shareholder (see Casella, Llorente‐Saguer, and Palfrey (2012), Lalley and Weyl (2018), and references therein). Our paper is complementary to the above papers, since we abstract from vote‐trading and assume one‐share‐one‐vote throughout.…”

Anticompetitive Effects of Common Ownership

“…More recently, Davis (2008) suggests that increasing concentration of mutual fund ownership of U.S. firms points to "a new finance capitalism," but focuses on ownership by families of 4 Early models of voting on production choices and the internalization of production externalities include Benninga andMuller (1979), DeMarzo (1993), and Crès and Tvede (2005). See also Dekel, Jackson, and Wolinsky (2008), Dekel and Wolinsky (2012), and Casella, Llorente-Saguer, and Palfrey (2012). 5 See also Bernheim and Whinston (1985), Flath (1991Flath ( , 1992, Malueg (1992), Nye (1992), Bolle and Güth (1992), Reitman (1994), Parker and Röller (1997), Clayton and Jorgensen (2005), Gilo, Moshe, and Spiegel (2006), Foros, Kind, andShaffer (2011), Bebchuk, Kraakman, andTriantis (2000), and Nain and Wang (2016).…”

Public Information as a Source of Disagreement Among Shareholders

“…The desirability of communication among shareholders also depends on the approach taken: with common preferences, communication can aid information aggregation (Coughlan 2000;Gerardi and Yariv 2007), whereas with heterogeneous preferences it seems inconsequential. The desirability of regulations about vote trading and empty voting are different in homogeneous preference environments (Christoffersen et al 2007;Esö et al 2014;Brav and Mathews 2011) than in heterogeneous preferences ones Black 2007, 2008;Casella et al 2012). Finally, assessments of the consequences of regulation of proxy advisors also depend on the perspective (see Malenko and Malenko 2019;Malenko et al 2021;Buechel et al 2022;Ma and Xiong 2021 for the case of homogeneous preferences, and Matsusaka and Shu 2021 for the case of heterogeneous preferences).…”