Seminar
Portfolio Diversification, Market Power, and the Theory of the Firm
José Azar (IESE Business School, Universidad de Navarra)
TSE, October 9, 2017, 12:30–14:00, room MF 323
Reference
José Azar (IESE Business School, Universidad de Navarra), “Portfolio Diversification, Market Power, and the Theory of the Firm”, Fédération des Banques Françaises Seminar, TSE, October 9, 2017, 12:30–14:00, room MF 323.
Abstract
This paper develops a model of firm behavior in the context of oligopoly and portfolio diversification by shareholders. The management of each firm proposes a strategic plan to shareholders, and is evaluated based on the strategic plan. This leads to internalization and aggregation of shareholder objectives, including holdings in other firms, and situations where consumers/workers are also shareholders. When all shareholders hold market portfolios, firms that are formally separate behave as a single firm. I introduce new indices that capture the internalization effects from consumer/worker control, and discuss implications for antitrust, stakeholder theory, and the boundaries of the firm.
Research partnership
Fédération des Banques Françaises Research Initiative (sustainable)