Corporate self-regulation of imperfect competition

Abstract

We consider Cournot competition in general equilibrium. Decisions in firms are taken by majority voting. Naturally, interests of voters-shareholders or stakeholders-depend on their endowments and portfolios. We introduce two notions of local Cournot-Walras equilibria to overcome difficulties arising from non-concavity of profit functions and multiplicity of equilibrium prices. We show existence of local Cournot-Walras equilibria, and characterize distributions of voting weights for which equilibrium allocations are Pareto optimal. We discuss the performance of various governances and highlight the importance of financial markets in regulating large firms. KeywordsCournot-Walras equilibrium • Majority voting • Pareto optimality • Shareholder governance • Stakeholder democracy • Walrasian equilibria JEL Classification D41 • D43 • D51 • D61 • D71 * We would like to thank Sabria Behilil for assistance with the empirical part of the paper and audiences at University of East Anglia, EWET in Berlin and SAET in Ischia for helpful and constructive comments.

Platform Precommitment via Decentralization

“…Decentralization through a blockchain gives users decision power in the platform. Thus, my paper also shares some commonalities with the literature on common ownership in traditional corporations, for example Magill, Quinzii and Rochet (2015), Cres and Tvede (2023) and Azar and Vives (2021), but with a drastically different focus.…”

The Value of Decentralization Using the Blockchain

“…Magill et al (2015) argue how common ownership, implemented by employee and consumer rights, may improve welfare compared to shareholder value maximization. Cres et al (2020) solve for the optimal distribution of voting rights such that the Cournot-Walras equilibrium allocations are Pareto optimal. Azar and Vives (2021) establish conditions under which common ownership leads to market concentration, and discuss how such markets should be regulated.…”