Production in incomplete markets: Expectations matter for political stability |
| |
Authors: | Hervé Crès Mich Tvede |
| |
Institution: | 1. Sciences Po, 27 rue Saint Guillaume, 75007 Paris, France;2. Department of Economics, University of Copenhagen, Studiestraede 6, DK-1455 Copenhagen K, Denmark |
| |
Abstract: | In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear–quadratic setup we show that the endogenization of voting weights (given by portfolio holdings) can give rise to – through self-fulfilling expectations – dramatical political instability, i.e. Condorcet cycles of length two even for very high majority rules. |
| |
Keywords: | |
本文献已被 ScienceDirect 等数据库收录! |
|