Objective Function of a Non-Price-Taking Firm with Heterogeneous Shareholders

48 Pages Posted: 31 Oct 2019

See all articles by Alexandr Moskalev

Alexandr Moskalev

Department of Economics – University of Michigan

Date Written: March 5, 2019

Abstract

I derive the objective function of a firm with heterogeneous shareholders. In contrast to Fisher separation theorem, I drop the price-taking assumption. Therefore, shareholders have no unanimous preferences for profit maximization. I allow shareholders to act strategically by omitting the conditional sincerity assumption and by accounting for possible correlation in their votes. I derive the exact form of the objective function and provide the equilibrium existence conditions. The resulting objective function can be approximated by a weighed sum of shareholders portfolios' profit. Shareholder groups with positive within group correlation carry greater weight.

Keywords: Firm's objective, Heterogeneous shareholders, Common Ownership, Correlated voting

JEL Classification: D21, D43, D70, G34, L10

Suggested Citation

Moskalev, Alexandr, Objective Function of a Non-Price-Taking Firm with Heterogeneous Shareholders (March 5, 2019). Available at SSRN: https://ssrn.com/abstract=3471564

Alexandr Moskalev (Contact Author)

Department of Economics – University of Michigan ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

HOME PAGE: http://alexmoskalev.com/

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