Les Cahiers de Recherche - HEC Paris
Majority stable production equilibria : a multivariate mean shareholders theorem
Abstract: In a simple parametric general equilibrium model with S
states of nature and K < S firms - and thus potentially incomplete
markets-, rates of super majority rule p€[1/2, 1] are computed which
guarantee the existence of p -majority stable production equilibria :
within each firm, no alternative production plan can rally a proportion
bigger than p of the shareholders, or shares (depending on the governance),
against the equilibrium. The smallest p are obtained for announced
production plans whose span contains the ideal consumptions of all K mean
shareholders. This is done under various governances. These rates of super
majority are shown to be always smaller than Caplin and Nalebuff (1988,
1991) bound of 1-1/e ~ 0.64. Moreover, simple majority production
equilibria are shown to exist for any initial distribution of types when
K=S-1, and for symmetric distributions of types as soon as K > S/2.
Finally, through parametric examples, these rates are shown to decrease
with the homogeneity of the shareholders' beliefs on the probabilities of
the states of nature, and to increase with the shareholders' pessimism.
Keywords: Shareholder's vote; general equilibrium; incomplete markets; super majority; (follow links to similar papers)
JEL-Codes: C60; C68; (follow links to similar papers)
39 pages, June 1, 2000
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