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Production externalities: internalization by voting

Lookup NU author(s): Professor Mich Tvede

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Abstract

We study internalization of production externalities in perfectly competitive markets where production plans are decided by majority voting. Since shareholders want firms to maximize dividends of portfolios rather than profits, they are interested in some internalization. Two governances, namely the shareholder governance (one share, one vote) and the stakeholder democracy (one stakeholder, one vote), are compared. We argue that perfect internalization is more likely to be the outcome of the stakeholder democracy than the shareholder governance.

Publication metadata

Author(s): Cres H, Tvede M

Publication type: Article

Publication status: Published

Journal: Economic Theory

Year: 2013

Volume: 53

Issue: 2

Pages: 403-424

Print publication date: 01/03/2012

Date deposited: 13/01/2012

ISSN (print): 0938-2259

ISSN (electronic): 1432-0479

Publisher: Springer

URL: http://dx.doi.org/10.1007/s00199-012-0697-z

DOI: 10.1007/s00199-012-0697-z

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