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Imperfect Competition and Corporate Governance
Author(s) -
KELSEY DAVID,
MILNE FRANK
Publication year - 2008
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2008.00399.x
Subject(s) - economics , oligopoly , commit , corporate governance , imperfect competition , microeconomics , market power , coase theorem , profit (economics) , monopoly , monopolization , industrial organization , distortion (music) , competition (biology) , imperfect , function (biology) , precommitment , transaction cost , finance , cournot competition , amplifier , ecology , linguistics , philosophy , cmos , database , electronic engineering , biology , computer science , engineering , evolutionary biology
This paper studies the objective function of the firm in imperfectly competitive industries. If those involved in decisions are also consumers the usual monopoly distortion is reduced. In oligopolistic industries, this may give the firm a strategic advantage and hence, in the right circumstances, will increase profit. If the firm cannot commit not to change its constitution, we find a Coase‐like result where all market power is lost in the limit. This enables us to endogenise the objective function of the firm. Finally we present a more abstract model of governance in the presence of market distortions.