Customer-Controlled Firms: The Case of Stock-Exchanges

Rodney L. White Center for Financial Research Working Paper Series 2-98

Posted: 29 Apr 1998

Multiple version iconThere are 2 versions of this paper


In many industries there are firms whose owners are also customers. They have contrasting interests: They get more utility as the firm's profits increase, and the prices of the good decreases as their private consumer surplus increases. An interesting example is the stock exchange industry. This paper shows that a customer-owned monopolist always achieves first-best social outcome, but in customer-controlled firms, profits are not necessarily maximized and minority shareholders are damaged. When customers have equal unit demand, less profits arise if they hold a share of the firm's capital lower than their percentage over the total number of customers. When customers have equal downward demand, the firm never maximizes profits; besides, if the share of capital of customer-owners is somewhat less than the weight of customer-owners over total customers, the firm will always price at 0. Customer-controlled stock exchanges are welfare efficient if the customers (listed firms, intermediaries, price vendors, etc.) hold an amount of capital equal to their proportion over the total number of customers. They never price at the monopoly price and, thus, do not maximize profit. This finding casts some doubt on the policy of listing a stock-exchange company itself on exchanges.

JEL Classification: G32

Suggested Citation

Di Noia, Carmine, Customer-Controlled Firms: The Case of Stock-Exchanges. Rodney L. White Center for Financial Research Working Paper Series 2-98. Available at SSRN:

Carmine Di Noia (Contact Author)

ASSONIME ( email )

Piazza Venezia 11
ROMA, 00187

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information