Ownership structure and control in incomplete market economies with transferable utility

We consider an economy with incomplete markets and a single firm and assume that utility can be freely transferred in the form of the initially available good 0 (quasilinearity). In this particularly simple and transparent framework, the objective of a firm can be defined as the maximization of the total utility of its control group <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$${\fancyscript C}$$</EquationSource> </InlineEquation> measured in units of good 0. We analyze how the size and the composition of <InlineEquation ID="IEq2"> <EquationSource Format="TEX">$${\fancyscript C}$$</EquationSource> </InlineEquation> influence the firm’s market behavior and state conditions under which the firm sells its output at prices which are at, above, or below marginal costs, respectively. We discuss the assumption of competitive price perceptions and point out important differences between the concepts of a Drèze and of a Grossman-Hart equilibrium that occur in spite of the close similarity of the formulas which define them. Copyright Springer-Verlag 2012